How to Get an Unsecured Personal Loan
If you have the desire to get an unsecured personal loan, it’s important to understand how the process works and what to expect along the way.
The word “unsecured” means you aren’t required to put up any collateral in exchange for receiving funds. This is in contrast to a secured loan in which your home, car, or another valuable asset acts as collateral.
A personal loan is money borrowed from a financial institution, such as a bank or credit union, which is paid back via fixed payments over the course of several years. It can be used for everything from travel to paying medical expenses to debt consolidation (and that’s just the start).
What are the Benefits of an Unsecured Personal Loan?
Before getting an unsecured personal loan, you’ll want to compare the benefits to other options.
Here are some of the most powerful benefits:
- As an unsecured loan, you don’t risk losing your collateral in the event of default
- Fixed monthly payment
- Competitive interest rate
- Varying terms
- Ability to quickly secure funds, typically within one business day of approval
With so many benefits, an unsecured personal loan may be just what you need to obtain funds to make an important purchase or deal with a financial emergency.
If you decide that a personal loan is right for you, it’s time to get started.
Here are the basic steps you should take:
- Make a list of three to five reputable personal loan lenders
- Learn more about the requirements
- Choose the right lender and complete an application
Once you do these things, you can sit back and wait for a final decision. If approved, you can sign on the dotted line and receive your funds within one business day. If denied, you can always contact another lender.
Your Credit Score is a Big Deal
As an unsecured loan, the lender is taking on more of a risk. If you default, they aren’t in position to repossess your collateral.
This is why your credit score is the number one factor a lender considers when approving or denying your loan application.
If you have a very good or excellent credit score – 725 or higher – you’re in good position to receive an approval.
Conversely, if you have poor or fair credit, it’s much more difficult to find a lender that’s willing to lend you money.
Just the same, a lack of credit history lessens your likelihood of an approval.
What’s the Risk?
With an unsecured personal loan, you’re expected to pay back the money within a specified period of time, typically one to seven years.
If you don’t live up to the terms and conditions of the loan, the lender has the right to take you to court in an attempt to collect. Since there is no collateral, it’s the best way for the lender to take action.
Furthermore, missed or late payments can result in extra fees as well as a red mark on your credit report.
If everything checks out and you find that an unsecured personal loan makes sense, complete an application, obtain the funds, and begin to pay back the money as required.