Unsecured Loans

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What is an unsecured loan?

Unsecured loans don’t require collateral, such as a home, vehicle or savings account. Instead, they are backed only by the borrower’s creditworthiness and promise to repay the loan. A common type of unsecured loan is a personal loan.

Unsecured personal loans range from about $1,000 to $50,000. They’re typically repaid in fixed monthly payments over a set period of time, typically two to five years. They’re offered by banks, credit unions and online lenders.

The proceeds can be used to pay for almost anything, including:
Debt Consolidation
Credit Card Refinancing
Business Expenses
Home Improvements
Vehicle Purchases
Moving Expenses
Medical Expenses
Wedding Expenses

5 unsecured loan options for 2021

Lending platformAPRLoan AmountsBest for...
LightStream3.99% - 19.99%$5,000 - $100,000Unsecured personal loans for good creditSee Offers
Payoff5.99% - 24.99%$5,000 - $40,000Unsecured personal loans for debt repaymentSee Offers
PenFed Credit Union5.99% - 17.99%$500 - $50,000Unsecured credit union personal loansSee Offers
Upstart6.46% - 35.99%$1,000 - $50,000Unsecured personal loans for bad creditSee Offers
Wells Fargo Bank5.74% - 24.24%$3,000 - $100,000Unsecured personal loans from a bankSee Offers

*Annual percentage rate (APR) is a measure of your cost of borrowing and includes the interest rate plus other fees. Available APRs may differ based on your location. APR may include autopay discount.

Advantages of no-collateral loans

  • Fast funding
    With unsecured loans, you don’t need to appraise an asset like your home or car. Your application may be approved in minutes, and the funds may be deposited into your account as quickly as  the same day or the following business day.
  • No collateral needed
    By definition, unsecured loans don’t require collateral — unlike, say, a mortgage which requires you to back your loan with your home. If you default on an unsecured loan, your property will not be repossessed.
  • Fixed interest rates
    While some other forms of credit that have variable interest rates, such as credit cards, unsecured personal loans usually have fixed interest rates that don’t change for the life of the loan. This means your monthly payments will be consistent and predictable.

Key differences between secured and unsecured loans

Unsecured personal loans
  • Do not require collateral, so no assets can be seized if you default on the loan.
  • Often require a higher credit score and carry higher interest rates.
  • Are approved based largely on creditworthiness.
  • Include most personal loans, as well as student loans.
Secured Personal Loans
  • Require property or assets as collateral, which could be seized if you default.
  • Are easier to obtain because the lender takes on less risk if you can’t pay.
  • Typically come with lower interest rates than unsecured personal loans.
  • Include car loans, mortgages, home equity loans and home equity lines of credit.

How to get an unsecured personal loan

  1. Get your credit score. Unsecured personal loans are backed by a borrower’s promise to repay, so an applicant’s credit score and repayment history are important in determining eligibility and potential APRs.
  2. Prequalify through multiple lenders. Many personal loan lenders let you check your eligibility with a “soft” credit pull, meaning it won’t affect your credit score. Note that LendingTree’s personal loan marketplace lets you fill out one form to get up to five loan offers from partner lenders, depending on your creditworthiness.
  3. Compare personal loan offers. When shopping for the best unsecured personal loan, compare the interest rate, fees and other terms like total loan amount and length. It’s also important to look out for certain conditions, such as prepayment penalties which may be assessed if you repay the loan early.
  4. Formally apply and get your documents in order. Applicants for unsecured loans must complete a formal application, which will require a “hard” credit check. You’ll need to provide documentation showing you have sufficient income to repay the new loan — usually pay stubs and W-2 forms, or tax returns if you’re self-employed.
  5. Receive your loan funding, if approved. In many cases, you can complete the personal loan application online and receive your funding directly in your bank account within a matter of days.

What are average unsecured loan interest rates?

Interest rates on unsecured personal loans can vary widely depending on the credit rating of the borrower as well as the loan terms, such as loan amount and length.

It’s possible for consumers with good or excellent credit to get a personal loan with a low interest rate, but bad-credit applicants will have a hard time qualifying for an affordable personal loan — if they receive any offers at all. The table below shows how APRs can vary based on credit score:

Average best offered APR by credit score

Credit bandAPR

Source: LendingTree Personal Loan Offers Report, February 2021

Can you get an unsecured personal loan with bad credit?

Yes, but with a few caveats. Unsecured loans are considerably more risky for lenders when compared with secured loans, especially for borrowers with subpar credit. Most unsecured personal loan lenders require borrowers to have good or excellent credit (defined as a credit score of over 660 by TransUnion). So, your chances of getting a loan will be much lower if you have a credit score of 660 or less, or a history of missed payments, debt collections or charge-offs by lenders for debt you were unable to pay.

Be on the lookout for lenders advertising unsecured loans for bad credit or unsecured loans with no credit check — these aren’t standard personal loans. Most likely they are payday loans, which come with short repayment terms and high interest rates.

If you have bad credit, you may still be able to find a reputable provider for a personal unsecured loan. You could also try the following:

  • Enlist the help of a cosigner. If you have less-than-ideal credit, lenders might be more willing to work with you (as well as offer better loan terms) if you have a loan cosigner.
  • Opt for a secured loan instead. Secured personal loans require you to put up an asset you own, such as a vehicle, as collateral.
  • Raise your credit and reapply. You can check and monitor your credit score for free on the LendingTree app.

FAQ: Unsecured loans

Unsecured debt isn’t backed by a form of collateral. For example, your typical credit card debt is unsecured — if you default, nothing is seized. Mortgage debt, on the other hand, is secured debt. If you default, you could lose your home.

Personal loans can be secured or unsecured, but they’re typically unsecured. Secured personal loans require some kind of collateral, such as a vehicle or savings account or certificate of deposit (CD).

If you default on an unsecured personal loan, your credit score will take a major hit. Lenders might sell your debt to a third-party collection agency in an attempt to recover some of it, alert credit bureaus to the default or take you to court. These actions could negatively impact your credit for years.

Some payday lenders will advertise unsecured loans with guaranteed approval. This is a risky path to take, these loans come with short terms and often exceptionally high interest rates. It’s best to avoid unsecured loans with no credit check or guaranteed approval.