Compare the Best Companies for Unsecured Personal Loans
Sometimes life throws you a financial curveball and securing a loan to smooth things over can at times be easier said than done. A popular option is to look for unsecured personal loans—offered by many of the best personal loans companies. These are often easier to get than secured loans, though there are some guidelines to keep in mind before moving forward.
The main difference between a secured and unsecured loan is that with a secured loan you put down some sort of collateral – such as your house or a car – which the bank can seize if you are delinquent on your debt. There is no such collateral with an unsecured debt, and gaining approval for an unsecured loan can often be easier.
Best Unsecured Personal Loan Companies at a Glance
|Lender||APR||Loan Term||Credit Score|
|4.79%-35.99%||3-180 months||Fair +|
|5.895%-15.49%||36-84 months||Good +|
|4.99%-35.99%||24-84 months||Fair +|
|5.99%-35.89%||36-60 months||Fair +|
|15.49%-34.99%||24-48 months||Fair +|
5 Best Unsecured Loan Companies:
- Min. Credit Score: Fair +
- APR: 4.79%-35.99%
- Loan Amount: $1,000 - $35,000
- Repayment Terms: 3 months - 15 years
LendingTree is a major industry leader that for over 2 decades has helped people attain all sorts of loans online. LendingTree isn’t a financial institution of its own, but facilitates loans between lenders and borrowers. You punch in your details and what you’re looking for, and LendingTree does the leg work and finds loans that can answer your needs.
One of the advantages to LendingTree is the sheer scale of its lender network, which can find you loan options for everything from medical expenses to debt consolidation. With so many lenders competing through the site, you should be able to find some very friendly interest rates.
- Min. Credit Score: Good +
- APR: 5.895%-15.49%
- Loan Amount: Up to $100,000
- Repayment Terms: 3 - 7 years
SoFi is used to dealing with borrowers with less than ideal financial credentials. The company was founded in 2011 to help students repay student loans, one of the classic forms of unsecured personal loans. One of their most appealing features is unemployment protection, which will freeze your payment cycle if you lose your job, possibly saving you from getting behind your payments.
Though the company caters to students and young professionals, you will still need a pretty healthy credit score of 660 to qualify, however.
In an added feature, SoFi provides financial planning assistance for customers, to help them achieve stability.
- Min. Credit Score: Fair +
- APR: 4.99%-35.99%
- Loan Amount: $1,000 to $40,000
- Repayment Terms: 2 - 7 years
If you’re looking for a quick, small-scale loan with flexible rates, Guidetolenders is a smart way to go. Like with other companies, you specify the size of the loan you need and the company will shop around and find one that works for your budget.
Guidetolenders has a simple application process and is flexible enough to handle loans as small as $1,000, though if you need a loan larger than $40,000 you’ll need to look elsewhere. That said, the payment plans offered are more varied than with other companies, and range from 24 to 84 months. Also, with the competition between lenders, you should find competitive rates.
- Min. Credit Score: Fair +
- APR: 5.99% - 35.89%
- Loan Amount: $1,000 to $40,000
- Repayment Terms: 3 or 5 years
One of the largest, most-successful P2P lending companies, LendingClub is known for providing quick, flexible loans ranging from $1,000 to $40,000.
The company has received high marks for customer service, and for an online knowledge base that should be able to walk you through most questions. In addition, they specialize in consolidating debt, so if you’re looking to simplify your debt and get it all under one roof, LendingClub should be one of your top options.
As the company operates without any physical infrastructure, costs are kept low, potentially helping you save money. Not only that, the online application is easy and takes just minutes to complete.
- Min. Credit Score: Fair +
- APR: 15.49%-34.99%
- Loan Amount: $2,000 to $25,000
- Repayment Terms: 2 - 4 years
If you have a poor credit score, LendingPoint could be the way to go. LendingPoint caters to people who have been turned down due to a low credit score and offers flexible payment terms of between 24 and 48 months.
The company has also received praise for speed. Loans can be approved and sent by wire within 24 hours, truly setting LendingPoint apart from the crowd.
On the other hand, because it works with low credit borrowers, LendingPoint tends to charge higher than usual interest rates in order to make up for the risk, as well as a 5% origination fee. Before taking on a loan from LendingPoint, make sure to map out the best payment plans for you to insure that you don’t get behind in the payments and face the higher interest rates.
Pros and Cons of Unsecured Loans
The clearest benefit of an unsecured loan is that you don’t need to borrow against any of your own assets. This makes unsecured loans a reliable option for people who don’t own property or any other sort of collateral, but who still need to take out a loan. The lack of collateral does bring with it higher risk. This risk tends to be passed on to the borrower, who is saddled with higher interest rates and a shorter repayment period for the loan. This can mean that while you are able to receive a loan quickly without having to risk any personal assets, you may face monthly payments that are difficult to make. Missing these payments could affect your credit score, potentially harming your financial future.
Also, because they are riskier, the ceiling on these loans tends to be lower. That’s part of the reason that unsecured loans are often the loan of choice for people who just need a small amount of money.
What to Consider:
How big a monthly payment can you afford?
If you've decided to take out an unsecured loan, chances are you don’t need an especially large amount of money. Look at your monthly income and expenses and figure out an estimate of how large a monthly payment you can make. The last thing you want is to fall behind on the monthly payments and find yourself more in debt.
What’s the annual percentage rate (APR)?
Make sure to look at the annual percentage rate (APR). This refers to the yearly rate charged for a loan, and typically it is shown as a percentage that corresponds to the total yearly cost of the loan. While unsecured loans tend to have higher APRs, shop around some and you can find one that’s easier on your budget.
Is your loan a fixed or variable rate loan?
You should also check whether or not your loan has a fixed or variable interest rate.
With a fixed interest rate your monthly payments will always stay the same, but you won’t benefit from interest rate drops and you’ll be limited in your options for additional or early repayments. Variable interest loans allow you to pay off the loan early with extra payments if you’d like and you can benefit from reduced mortgage rates over the lifetime of the loan. That said, you lose out on the reliability of a fixed loan.
What are peer-to-peer loans?
One of the main ways that people attain unsecured loans today is through peer-to-peer (P2P) loans, which match lenders with borrowers online, bypassing the traditional financial institutions. Going this route is beneficial in that it allows you to shop around with a wide variety of lenders, helping you find the terms that are best for you.
If you’re still unsure about taking an unsecured loan, take a look at some industry leaders to get a sense of the bottom line.
Unsecured Personal Loans for Debt Consolidation
A personal loan can be a great way to consolidate debt, deal with a sudden cash flow emergency, or take that special vacation that you haven’t quite saved the money for. If you’re looking to take out an unsecured loan you should weigh a few different considerations before making your decision. First the good news: with an unsecured loan, you don’t have to put down any collateral, so you don't have to worry about the lender seizing your home, house, or other security that you put on the loan. This lowers the risk for the borrower, but everything has its price. Because there is no collateral, the lender is taking a bigger risk and will usually charge a higher interest rate on an unsecured loan. This can make a big difference in your payments over the life of the loan and therefore you should keep this in mind when considering using an unsecured loan for debt consolidation.
How to Apply for an Unsecured Personal Loan?
Figure out what you need
It may sound self-evident, but it’s very important to first get a clear idea on how big a loan you need. If you have specific expenses to cover you’ll want to make sure the loan is big enough to cover them, but you’ll also want to make sure that you don’t take out a loan that will require monthly payments you can’t keep up with. Crunch the numbers, and then start shopping around.
Check your credit score
Typically speaking, the higher your credit score the better your chances of getting a loan. Your credit score is basically a rating of how risky you are as a borrower and a way of assessing the chances that you won't repay the loan. In general, the higher your score the better the terms of your loan. If you’re worried that the terms will be too tough and you don't need the loan right away, consider taking the time to repair your credit first, and then apply for a loan a little further down the line. The better terms can really make a difference.
Get pre-qualified for a loan
This is a step that a lot of people skip, and that’s unfortunate. When you pre-qualify for a loan, what you’re doing is getting an assessment of the types of loans you’re likely to receive, thus allowing you to make a more informed decision about how big a loan you should take and from where.
The lender will ask you for a series of documents like pay stubs and your monthly debts, in order to paint a picture of you as a borrower. Pre-qualifying for a loan is a great way to be a more informed borrower.
Weigh your options
A personal loan can have a significant impact on your financial status for the years to come and you should really do your homework before signing on the dotted line.
Compare the various industry leaders in terms of their average rates and customer ratings, and speak to company representatives if possible in order to get a sense of which lenders can give you the best loan with the right terms for you. Keep in mind that you’re the customer and the banks need you just as much as you need them, and act accordingly.
Like a lot of things in life, a good rule of thumb is not to take the first offer and don’t rush things. Take your time and make a deep, informed comparison of the various lending companies and then make the call when you’re ready.
Unsecured loans carry risks for lenders and borrowers alike. The interest rates tend to be high, and if you miss a payment you can hurt your credit score and your financial stability down the road. That said, these loans can be a real lifesaver for people who need money for an investment and simply don’t have the collateral to put down at the bank. Most importantly, these days there is a whole world of online lending companies where the consumer can call the shots. Read reviews of the top lenders to help you decide which one to use, and you’re on your way.