What is Unsecured Personal Loan?
Unlike the high interest and complicated process of applying for a bad credit personal loan, unsecured loans involve borrowing money from a lender without having to pledge any asset to secure financing. Pledging an asset is typically known as collateral. Collateral is used to secure the loan, seize and sell it to repay the loan if the borrower does not repay it in a specified time.
Unsecured loans are loans without collateral. Unsecured loans are riskier for lenders, and thus they come with a high rate of interest. Other factors like income, debt-to-income ratio, etc., are also considered by lenders before giving out unsecured loans.
Unsecured personal loans typically run for two to five years, while the total amount is generally between $1000 to $50,000. These loans can be used to finance anything from medical expenses, home improvement projects, consolidating debt, etc.
Currently, in 2021, you have a wide variety of options to choose an unsecured loan. You can easily research and compare rates, get quotes, complete the application process online within a few minutes to get an unsecured personal loan. Whether you have a good credit score or a poor credit score, there is always a lender out there that fits your needs.
Who can apply for unsecured personal loan?
Borrowers who are in need to secure financing quickly are well-suited for unsecured personal loans. This is typical because the loan approval process takes less time. Sometimes it takes just a few hours. Access to funds is also pretty quick.
How to qualify for unsecured personal loan?
The following factors are considered to check your eligibility to qualify for an unsecured personal loan.
Good credit history
An unsecured loan is not backed up by collateral. Thus, the creditworthiness of an applicant plays a crucial role in securing an unsecured personal loan.
An applicant having good credit history may be offered an unsecured loan at a lower rate of interest than some one with poor credit score seeking a bad credit business loan. While the other applicant having a bad credit score might have to pay a rather expensive interest rate.
Consider using a co-signer
In case your credit score is not stellar, you might want to consider using a co-signer. Lenders might be more willing to approve your loan application when you have a loan co-signer.
Get your documents in order.
To get approval on your online application, you need to verify your income to prove that you have sufficient funds to repay a new loan.
Best Unsecured Personal Loan Lenders
Top choices for Unsecured Loans
Lending Club is based on the peer-to-peer lending model. Instead of depending on traditional banks or financial institutions, Lending Club connects you with individual investors who can fund your loan. This lender is one of the pioneers of online lending. Thus, this gives Lending Club a lot of reliability and credibility.
Lending Club allows you to apply for loan amounts of up to $40,000 and repay it over 36 or 60 months. After approval, borrowers receive the funding within three days. Lending Club charges an origination fee that ranges from 1-6% of the loan amount.
- The terms of Lending Club are clear, and their service is well-established.
- You can apply for a loan online and get your loan pre-approved within minutes.
- Lending Club charges origination fees, late payment fees, and return payment fees.
- Applicants need to have a credit score of at least 600 and a debt-to-income ratio of 31%.
Upstart is a great option when you need financing immediately. You need to complete an online application, and if approved, you may get funds as quickly as the next day, which makes this option extremely convenient.
Your educational and employment history is considered by Upstart while evaluating your eligibility for a loan. Thus, eligibility goes beyond the credit score, and a borrower with a fair credit score and stable income or employment might be approved quickly.
- Upstart does not charge any prepayment penalty.
- It considers your education and employment history for loan approval.
- Upstart has a quick and simple application process.
- Borrowing terms are limited to five years.
- Upstart charges an origination fee.
Payoff personal loans are best suited for people who want to consolidate credit card debt. These loans are meant for people with good credit who want to eliminate high-interest credit card debt.
- No extra fees:In case you miss an installment, you will not have to pay any late fees. You can speak with a Payoff representative and defer a payment, skip a payment or change the payment date. They do not charge any application fee or prepayment fee.
- Slower Funding time:You will receive funding within 3-6 business days after approval.
- Origination fee:Payoff charges a one-time origination fee. It is 5% of the loan amount.
Personalloans.com functions differently than the other options mentioned. It provides referrals to lenders and does not lend money itself.
However, this feature of Personalloans.com makes it very easy for a borrower looking for a short-term loan and having a fair credit score to research different options.
- Loan amounts as high as 35,000$ can be borrowed through Peronalloans.com.
- Short-term loans can range from 90 days to as long as 72 months.
- No prepayment penalties are charged.
- The information process is less transparent when compared with direct lenders and makes it difficult to compare and figure out APRs, terms, and other information.