What are my options for an unsecured loan

October 12, 2017
Your options for unsecured loans (loans with no collateral) will depend on the amount of money that you need to borrow and your current credit score. You may be able to get larger loans or get better interest rates if you have a high credit score. However, some of the most convenient unsecured loans are available to everyone because the lenders do not look at credit score, but at other variables like bank account balance and salary.
What are my options for an unsecured loan

Here are your options for unsecured loans.

  • Credit cards can actually be considered a type of unsecured loan because you are borrowing from the credit card company every time you use your card, and you do not put up anything to secure the loan. Also, like loans, credit cards have interest charges.
  • Online personal loans are arguably the most convenient unsecured loans because you only need to show the lender a bank statement and a pay stub. Unlike other unsecured loans, a good credit score is not needed for an online personal loan. These loans are usually for $700 or so. If you need a larger amount of money, other options might be better. However, if you need a few hundred dollars quickly, these loans are the best choice.
  • Peer-to-peer loans involve borrowing money from private lenders. The only way to do this safely is to borrow through a third party platform. A number of these platforms exist. You can borrow any amount, and usually get a decent interest rate if you have a good credit score. However, if you do not have a good credit score, you may be able to find a better interest rate from a bank or online loan provider.
  • Signature loans do not require collateral. Usually available from banks, you secure these loans by signing your name to a contract (thus “signature.”) The terms of signature loans usually require you (the borrower) to pay back to money in installments. That means that every month you will have to pay the same amount until all the money is paid back.
  • A line of credit is similar to a credit card. Instead of giving you a full loan, the bank will give you a credit limit. You can borrow up to that limit, but you are not required to borrow up to that limit. This can be a useful type of unsecured loan if you want to invest in home improvements and you are unsure of the overall cost. A line of credit will give you the flexibility to borrow if needed without committing to borrowing the full amount.

If you have poor credit or if you only need to borrow a few hundred dollars, online personal loans are often the best option. However, for larger amounts, people with good credit scores should be able to get an unsecured loan with a decent interest rate. If they are able to secure the loan with a home or auto, for example, then the borrower should be able to get an even lower interest rate.