Compare Unsecured Personal Loans

What is an Unsecured Loan?

Unsecured personal loans differ from secured loans in that they do not have to be backed by any form of collateral. They are approved based on the borrower’s credit history and income stability, and they can be used for a variety of personal needs.

The Benefits of Taking Out an Unsecured Loan

Unsecured personal loans can be helpful in many ways. Here are a few reasons borrowers look for unsecured loans:

• No collateral. Borrowers are not required to provide collateral, such as a vehicle or private residence, to receive the loan.
• Flexible repayment options. According to the terms of this type of loan, the repayment length can be anywhere from a few months to several years.
• Multiple uses. This kind of loan can be used for a variety of things, making it more appealing.
• No early repayment fees. Most lenders do not charge borrowers for making early payments on their unsecured loans.

The Risks of Taking Out an Unsecured Loan

While taking out an unsecured loan can sound appealing, it’s important to consider some of the associated risks to make sure all bases are covered:

• High interest rates. Because there is no collateral needed for an unsecured loan, higher interest rates may be added to compensate for the potential of default.
• Possible negative impact on credit scores. Borrowers who default on their payment schedules can see a drop in their credit scores.
• Higher qualifications. Unsecured loans are based on the borrower’s creditworthiness, so a good credit history is typically needed for approval.

What You Should Know Before Choosing an Unsecured Loan

Unsecured loans can have a major impact on an individual’s life. Here are some things to be aware of before taking out this type of loan.

What is the highest available unsecured loan amount?

The loan amount will vary by lender and is based on a borrower’s creditworthiness. If a lender offers loans up to $50,000, that doesn’t necessarily mean that just anyone can be approved for that amount. The lender will review each application and determine whether to approve or reject individual requests.

Are unsecured personal loans guaranteed approval?

No loan comes with the guarantee of approval. Approval is based on factors such as income, credit history, and the purpose of the loan.

Can I get an unsecured personal loan with bad credit?

Unsecured loans are usually extended to those with a good credit history. But since lenders can do business with whomever they choose, it really is up to the individual company’s discretion if it would approve a loan for someone with bad credit.

What is the average interest rate on an unsecured loan?

Loan rates vary from lender to lender and can be anywhere from 5.66% to 29.95%. The final interest rate for an individual is determined by a credit check.

Do unsecured loans hurt your credit?

Borrowers who fail to repay their loans are likely to experience a dip in their credit scores. The consequences for defaulting on a loan do not change based on whether it is secured versus unsecured.

How to Get a Personal Loan Without Collateral