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:
Your APR may differ based on loan purpose, amount, term, and your credit profile. Rate is quoted with AutoPay discount, which is only available when you select AutoPay prior to loan funding. Rates under the invoicing option are 0.50% higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice. Payment example: Monthly payments for a $10,000 loan at 3.34% APR with a term of 3 years would result in 36 monthly payments of $292.31.
Fixed rates from 6.99% APR to 14.99% APR (with AutoPay). Variable rates from 6.26% APR to 14.10% APR (with AutoPay). SoFi rate ranges are current as of November 30, 2018 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 6.26% APR assumes current 1-month LIBOR rate of 2.33% plus 4.175% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
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.
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SoFi Personal Loans are not available to residents of MS. Maximum interest rate on loans for residents of AK and WY is 9.99% APR, for residents of IL with loans over $40,000 is 8.99% APR, for residents of TX is 9.99% APR on terms greater than 5 years, for residents of CO, CT, HI, VA, SC is 11.99% APR, and for residents of ME is 12.24% APR. Personal loans not available to residents of MI who already have a student loan with SoFi. Personal Loans minimum loan amount is $5,000. Residents of AZ, MA, and NH have a minimum loan amount of $10,001. Residents of KY have a minimum loan amount of $15,001. Residents of PA have a minimum loan amount of $25,001. Variable rates not available to residents of AK, TX, VA, WY, or for residents of IL for loans greater than $40,000.
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)
Your loan terms are not guaranteed and are subject to our verification of your identity and credit information.To obtain a loan, you must submit additional documentation including an application that may affect your credit score. Rates will vary based on many factors, such as your creditworthiness (for example, credit score and credit history) and the length of your loan (for example, rates for 36 month loans are generally lower than rates for 72 month loans).Your maximum loan amount may vary depending on your loan purpose, income and creditworthiness. Your verifiable income must support your ability to repay your loan. Marcus by Goldman Sachs is a brand of Goldman Sachs Bank USA and all loans are issued by Goldman Sachs Bank USA, Salt Lake City Branch. Applications are subject to additional terms and conditions.
*The Annual Percentage Rate (APR) is the cost of credit as a yearly rate and ranges from 5.99%-29.99%, which may include an origination fee from 0.99% - 5.99%. Any origination fee on a 5-year loan will be at least 4.99% and is deducted from loan proceeds. The APR offered will depend on your credit score, income, debt payment obligations, loan amount, loan term, credit usage history and other factors, and therefore may be higher than our lowest advertised rate. Requests for the highest loan amount may resulting an APR higher than our lowest advertised rate. You need a minimum 700 FICO® score and a minimum individual annual income of $100,000 to qualify for our lowest rate.
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 six 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. A loan example: a 5–year $10,000 loan with 9.99% APR has 60 scheduled monthly payments of $201.81, and a 3–year $5,000 loan with 5.99% APR has 36 scheduled monthly payments of $150.57. 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.
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Loan approval and actual loan terms depend on your ability to meet our standard credit criteria (including credit history, income and debts) and the availability of collateral. Loan amounts subject to state specific minimum or maximum size restrictions. Collateral offered must meet our criteria. Active duty military, their spouse or dependents covered by the Military Lending Act may not pledge any vehicle as collateral. CA minimum loan amount is $3,000. GA minimum loan amount is $1,500 for present customers and $3,100 for others.
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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 fall from 5.99% to 35.99%. 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.
View our list of lenders with no personal loan fees here
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.