Get access to funds and enjoy more flexibility with an unsecured personal loan.
An unsecured personal loan lets you borrow funds without using an asset as security. This type of loan comes with an increased amount of flexibility in terms how you use your loan amount. You can use your funds to make a large purchase, improve your home, consolidate debt or just about anything else you like.
Keep in mind that for most personal loans, you’ll need a good credit score of 680 or higher to be approved.
Find out if an unsecured personal loan is right for you by reading the guide below.
Prosper Personal Loans
You could borrow up to $35,000 for a variety of purposes, with rates starting from 5.99%.
- Recommended Credit Score: 640 or higher
- Minimum Loan Amount: $2,000
- Maximum Loan Amount: $35,000
- Loan Term: 3 or 5 years
- Turnaround Time: 1-3 business days
- Simple online application process
- No prepayment penalties
How unsecured personal loans work
Unsecured loans can be used for just about any legitimate purpose. When you apply for the loan, you may be asked to list why you are applying for it, and this will be part of the lender’s decision.
When completing your application, you’ll also need to list how much you want to borrow and choose your loan term. Unsecured personal loans offer varying amounts, usually between $1,000 and $50,000. Loan terms usually vary between one and seven years.
You’ll find that unsecured loans tend to come with higher rates than secured loans because the lender is taking on more risk. These loans can also come with establishment fees, monthly fees and annual fees, so be sure to check these before you apply.
Unsecured personal loans can have fixed or variable interest rates, and repayment restrictions differ between lenders – you may be able to make additional repayments and repay your loan early without penalty depending on your loan.
Compare unsecured personal loans
Use this table to compare the interest rates, loan amounts and eligibility requirements of top online lenders.
Why is the interest rate usually higher on an unsecured loan?
Interest rates on unsecured loans are usually higher for borrowers because the lender takes on more risk. If you default on the loan, you’ll have paid back more interest than on a secured loan. If your loan is secured the lender can take the asset you’ve used for collateral to recoup the outstanding amount.
Unsecured personal loan features to compare
Comparing your unsecured personal loan options is an important part of finding the right loan. Here are some things to keep in mind when doing so:
- Interest rate. Check whether the interest rate is fixed or variable and whether it’s competitive.
- Minimum and maximum loan amounts. Many lenders will set a minimum and maximum you can borrow – these usually vary between $1,000 and $50,000. It’s important to check that the amount you need falls between the two.
- Fees and charges. You can be charged upfront and ongoing fees with unsecured personal loans, so check what these are before you apply. You can look at the APR to see an overall cost for the loan which includes these fees.
- Additional features. Your loan may come with additional features that you might find convenient, such as online account management or discounts on additional products offered by the lender.
Horace is buying a boat
Horace is planning his travels over the break before he returns to work as a school administrator. He loves the idea of vacationing overseas and decided to buy a boat. Since the prices for boats can be a bit high, he looked into getting an unsecured personal loan.
Knowing he’ll be able to afford ongoing repayments on his current salary, Horace compared lenders offering loans for excellent credit scores. He checked the other eligibility criteria and then applied online. He found out he was approved soon after and made his way to the shore to enjoy the waters during the school break.
Pros and cons of unsecured personal loans
Pros
- No asset needed for security.
When getting an unsecured personal loan, there’s no need to supply an asset as security. If you’re purchasing an asset with your funds you won’t have to risk it, and you also won’t need to risk an asset you already own. - Flexible loan purpose.
You can use the funds however you like. Once you’re approved, the funds will be transferred to you and you can use them to consolidate debt, purchase what you need to or to invest. - Easy application process.
Applying for one of these loans is usually quite easy. The application can typically take place online if you can provide the appropriate documentation required. After the application, you can usually get a response in 60 seconds.
Cons
- Higher interest rates due to no collateral being offered.
As there is a higher risk involved from the lender, the interest rates are generally higher on unsecured loans.
Things to avoid with unsecured personal loans
- Lying about what you need the funds for. Always be upfront with your lender about why you’re applying for the loan, whether it be for business purposes or to consolidate debts.
- Getting into too much debt. If you’re taking out an unsecured loan to consolidate existing debts, you should be wary of getting yourself into financial trouble by increasing your debt. Make sure you’ll be paying less with this new loan than you’re paying on your current debts.
- Check that the lender providing your loan is licensed. Always make sure you’re getting a loan from a licensed lender. You can check the information at the very bottom of the website to see the lender’s details.
- Fees and charges. Where possible, always do your best to avoid excessive fees and charges. One way to do this is to make sure you do your research, ask questions and compare.
How to apply for an unsecured personal loan
If you think an unsecured personal loan is for you, you can use the comparison table above. After browsing through the table and finding a suitable loan, click the “Go to site” button to go to the lender’s website and start the application process.
Typically, to get an unsecured personal loan you’ll need to meet a range of eligibility criteria set by the lenders.
- You must be at least 18 years old.
- You must also have good credit and be able to provide proof that you can pay off the loan.
- You may be asked to provide copies of your pay stubs or bank account statements as proof of income.
- You’ll also need to verify identity.
Frequently asked questions
Can I get an unsecured personal loan for business purposes?
Some lenders may allow you to use the funds from an unsecured personal loan for business purposes, but others will not. You may need to specifically apply for a business loan.
I applied for an unsecured personal loan, but the rate I received was different than the advertised rate. Why?
There are two reasons this might have happened: A lender may operate on a tiered-rate system where your rate is determined by the information in your application, or the lender found you to be a higher risk borrower, so applied a higher rate to your account.
How can I get a low rate unsecured personal loan?
While unsecured personal loans generally come with higher rates than secured personal loans, you can still find a competitive low rate option. Compare your options using the comparison table above to a find a rate that fits your preference.
