Life always has a way of coming up with new ways to surprise us. When those surprises call for quick cash, an unsecured personal loan might be what’s needed to fill in the gap between the funds you have and the debts you owe.
Taking out a personal loan to consolidate your existing debts might be wise if you’re facing high interest rates. Also, rolling all your debts into a single payment and interest rate can make it easier to manage and track how much you owe and how long it’ll take for you to pay off the loans.
An unsecured personal loan may also be preferable to selling your assets to get the money you need to pay for large purchases or unexpected emergencies.
What is an unsecured personal loan?
A personal loan is considered unsecured when it’s not backed by collateral, such as your car, which could be repossessed by the lender if you default on your loan agreement. Instead, unsecured loans are backed only by your promise to repay the lender, which is why they are called unsecured, or sometimes signature, loans.
Because an unsecured loan doesn’t require you to put down any collateral, lenders rely heavily on various factors to determine whether you’ll pay back your loan in full. Such factors include:
What can an unsecured personal loan be used for?
An unsecured loan is provided to the borrower in a lump sum and can be used for virtually anything, including:
- Debt consolidation, which is where you use the personal loan to pay off high-interest debts, leaving you with an easier-to-manage single interest rate and monthly payment.
- Special experiences such as a wedding or honeymoon so that you can enjoy the experience without worrying about the money.
- Home improvements or other large appliance purchase, but borrowers should also consider alternatives such as a home equity loan or a home equity line of credit.
- Medical bills for an unexpected treatment that isn’t covered by your health insurance.
- College tuition to invest in your and your child’s future.
- Business expenses to scale and set up your organization for success.
- Unexpected expenses for those emergencies that often come up in life.
Still, borrowers should make it a point to check with their lender for any guidelines on ways in which the funds can be used.
Personal unsecured loans generally have term ranges between two and five years and rates that are usually fixed. The monthly payment is based on how much money you owe and the interest rate, which is determined by your credit rating and financial history. Some lenders offer revolving lines of credit that allow borrowers to withdraw as needed and only pay interest on the amounts withdrawn.
Where to find unsecured personal loans
If you’ve decided that a personal loan is right for you, you’ll need to begin researching lenders and the terms they offer.
MagnifyMoney offers a personal loan marketplace where you can discover lenders and review the loan terms they offer. But you may also consider these lenders:
As low as 3.99%
24 to 60
Minimum 500 FICO®
As of 17-May-19, LendingTree Personal Loan consumers were seeing match rates as low as 3.99% (3.99% APR) on a $10,000 loan amount for a term of three (3) years. Rates and APRs were based on a self-identified credit score of 700 or higher, zero down payment, origination fees of $0 to $100 (depending on loan amount and term selected).
5.99% - 20.01%
24 to 84
Minimum Credit Score
All rates, terms, and figures are subject to change by the lender without notice. For the most up-to-date information, visit the lender's website directly. To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.
See Consumer Licenses.
SoFi Personal Loans are not available to residents of MS. Minimum loan requirements might be higher than $5,000 in specific states due to legal requirements. Fixed and variable-rate caps may be lower in some states due to legal requirements and may impact your eligibility to qualify for a SoFi loan.
If you lose your job through no fault of your own, you may apply for Unemployment Protection. SoFi will suspend your monthly SoFi loan payments and provide job placement assistance during your forbearance period. Interest will continue to accrue and will be added to your principal balance at the end of each forbearance period, to the extent permitted by applicable law. Benefits are offered in three month increments, and capped at 12 months, in aggregate, over the life of the loan. To be eligible for this assistance you must provide proof that you have applied for and are eligible for unemployment compensation, and you must actively work with our Career Advisory Group to look for new employment. If the loan is co-signed the unemployment protection applies where both the borrower and cosigner lose their job and meet conditions.
Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
6.99% - 28.99%
36 to 72
5.99% - 29.99%
36 or 60
Minimum Credit Score
Best Egg loans are unsecured personal loans made by Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC. Equal Housing Lender. "Best Egg" is a trademark of Marlette Funding, LLC. All uses of "Best Egg" on this site mean and shall refer to "the Best Egg personal loan" and/or "Best Egg on behalf of Cross River Bank, as originator of the Best Egg personal loan," as applicable. Loan amounts generally range from $2,000-$35,000. Offers up to $50,000 may be available for qualified customers who receive offer codes in the mail. The minimum individual annual income needed to qualify for a loan of $50,000 is $130,000. Borrowers may hold no more than two open Best Egg loans at any given time. In order to be eligible for a second Best Egg loan, your existing Best Egg loan must have been open for at least four months. Total existing Best Egg loan balances must not exceed $50,000. All loans in MA must exceed $6,000; in NM, OH must exceed $5,000; in GA must exceed $3,000. Borrowers should refer to their loan agreement for specific terms and conditions. Your verifiable income must support your ability to repay your loan. Upon loan funding, the timing of available funds may vary depending upon your bank's policies.
To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. When you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you.
6.95% - 35.89%
36 or 60
Minimum Credit Score
**Example: A $5,900 loan with an administration fee of 4.75% and an amount financed of $5,619.75, repayable in 36 monthly installments, with an APR of 29.95% would have monthly payments of $250.30.
Based on the responses from 11,574 customers in a survey of 210,584 newly funded customers, conducted from 1 Feb 2018 - 1 Aug 2019 95.05% of customers stated that they were either extremely satisfied or satisfied with Avant. 4/5 Customers would recommend us. Avant branded credit products are issued by WebBank, member FDIC.
18.00% - 35.99%
24 to 60
Borrowers (other than present customers) in these states are subject to these maximum unsecured loan sizes: Florida: $8,000. Iowa: $8,500. Maine: $7,000. Mississippi: $7,500. North Carolina: $7,500. New York: $20,000. Texas: $8,000. West Virginia: $7,500. An unsecured loan is a loan which does not require you to provide collateral (such as a motor vehicle) to the lender.
Starting at 6.49%
36 to 60
Minimum Credit Score
on PenFed Credit Union’s secure website
You’ll find that personal loan lenders take different forms: traditional banks, credit unions, online lenders and peer-to-peer (P2P) lenders. If you’re not sure which lender is right for you, consider these pros and cons for each.
At one time, brick-and-mortar banks might have been your best option for a personal loan. But nowadays, you may find that your local bank isn’t a competitive option. Why? Because banks with physical branches have higher overhead costs than online lenders — and they’re still trying to make a profit off your loan. Still, they can be a convenient option.
- Can visit your local branch to learn more and apply
- Likely a trusted and known brand
- Higher fees
- May have stricter loan requirements
Because credit unions aren’t trying to profit off your loan, they can generally offer lower interest rates on their personal loans. But to get a personal loan through a credit union, you have to become a member first — and you won’t qualify for membership at every credit union.
- Lower fees
- May have lower loan requirements
- Have to become a member before applying
- Fewer locations compared to a big bank
Online lenders don’t have brick-and-mortar locations. That could be a good thing or a bad thing depending on your needs. But with fewer overhead costs, online lenders are competitive options for personal loans.
- Competitive rates and terms
- Easier to research, plus streamlined application processes
- Little name recognition can make them hard to find
- No physical locations for in-person aid
P2P lending is what it sounds like: Instead of going to a bank, borrowers receive their loans from their peers who they are connected to through a platform. Since P2P lending is only online, overhead costs are low and customers get lower interest rates. A personal loan through P2P lending comes with some cons, such as an origination fee, which is deducted from the total loan amount before the borrower gets their lump sum. Also, loans are not available in all states, and they can depend on debt-to-income ratio, financial history and career experience. They are generally limited to borrowers with above-average credit and income levels.
- Can share your story if you’re struggling to qualify
- Work with people rather than companies
- Likely to receive high rates
- Harder to qualify for a loan
How to compare personal loans: 3 factors to consider
With so many options, it’s beneficial for borrowers to consider several lenders for a comparison. Below are some considerations to take into account when shopping for a personal loan:
Take a look at MagnifyMoney’s personal loan marketplace and you’ll see that rates are as low as 3.99%. Your loan’s interest rate will impact how much you pay throughout the life of the loan, so it’s important to shop around for the best rate.
Interest rates are determined through various factors, depending on the lender, but they are generally decided based on the borrower’s credit, income and whether there’s a cosigner.
Fees are serious factors to take into account when choosing a lender as they will greatly impact your total loan amount. Here are two common fees:
- Origination fees are charged by the lender for processing a personal loan application. The origination fee is either presented as a flat rate or a percentage of the loan, which is typically withdrawn from the full amount of the loan and incorporated in the APR. This fee is negotiable.
- Prepayment penalties are charged when a borrower pays off their loan ahead of the term schedule.
If you have a strong credit history and are a good candidate for a personal loan, lenders will usually work with you on a repayment schedule that doesn’t overwhelm you each month. For instance, some lenders will allow you to use a cosigner who has good credit for a lower interest rate and term on your loan.
Some lenders take a nontraditional approach to the merit-based system utilized in personal loans. For instance, Earnest offers flexible terms along with customized loan and repayment plans, which work well for recent graduates who haven’t yet had the opportunity to establish a strong credit history. Upstart, founded by “ex-Googlers,” uses artificial intelligence and machine learning to determine whether someone would be a good borrower based on their education, career, job history and standardized test scores.
Some lenders are forgiving during challenging times. SoFi offers loan forbearance during a job loss. During this time, the interest will continue to accrue, but SoFi will not consider your payments overdue. LendingClub leaves its borrowers alone for at least 30 days if they’ve been affected by a natural disaster.
Applying for an unsecured personal loan
Most online lending platforms use a soft pull during the application process so that you will be able to shop around for the best interest rate and loan term without hurting your credit. These are called preapprovals or pre-qualification checks, but they are usually contingent on you passing a hard credit inquiry after you’ve accepted the loan offer.
While shopping around for the lender that works best for you, consider using MagnifyMoney’s loan payment calculator to get an idea of possible monthly payments. Put in the amount you need, the period you’ll need it for and the interest rate to get the estimated amount you’ll pay each month.
Submitting your application
Since an unsecured loan is not backed by anything other than a borrower’s creditworthiness, you’ll need a good credit score and documentation — recent pay stubs, tax returns and an offer letter to prove employment status – proving you have enough income to repay the new loan.
If you have this kind of information handy, the application process can be quick and simple.
Receiving loan funds
This varies by lender, but decisions are usually made quickly. Funds can be deposited as early as the same business day. Check with your lender on wait times.
Once you have your funds, make sure you are responsible with them. Taking on new debt can be scary if you don’t have a plan for repayment, so make sure you understand how your personal loan fits into your budget.
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As low as 3.99% APR
5.99% To 20.01% APR
Marcus by Goldman Sachs®
6.99% To 28.99% APR
4.99% To 16.79%* APR
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