Terms typically range from two to five years. The borrower receives a lump sum and repays the loan with equal monthly installments. Unsecured loan interest rates are usually fixed. However, there are also revolving lines of credit, which function like credit cards. Borrowers set them up and draw on them as needed, paying interest only on the amounts used. The monthly payment is based on the loan balance and interest rate, which is variable.
Interest rates on unsecured loans (the legitimate kind) vary according to the lender’s policies and the credit ratings of the borrowers. In 2014, rates for loans range from 6-7 percent at the low end to about 40 percent at the high end.