Depending on your financial needs, personal assets and credit history, an unsecured loan might be the right option for you. Unsecured loans involve borrowing money without having to put up the collateral needed for a secured loan. The advantage of a no-collateral loan is that you avoid the risk of repossession if you don’t make loan payments.
As you might expect, unsecured loans are considerably riskier for lenders, especially for borrowers with subpar credit. Such borrowers can expect to pay higher — and in some cases much higher — interest rates. Still, lenders will most likely consider other factors as well, such as your income and debt-to-income ratio, or how much debt you have relative to income.
The terms on unsecured loans have typical lengths of two to five years, while the total loan amounts often range from $1,000 to $50,000. Unsecured loans can also be used for almost anything — for business loans, home improvement projects and covering medical bills, as well as for consolidating debt (popular with personal loans) and even paying for big-ticket purchases, such as a major vacation.