Don't waste your time. Get a loan online.
unsecured personal loans bad credit
What is an unsecured loan?
An unsecured loan is issued mostly on a borrower’s credit worthiness, as opposed to a secured loan, which requires some form of collateral as security, such as a home, vehicle or savings account. Unsecured loans include most personal loans and student loans, while common examples of secured loans include mortgages and car loans. You don’t necessarily need a high credit score to qualify for an unsecured loan, but borrowers who have the highest credit ratings generally get the best interest rates and terms.
Is an unsecured loan right for you?
It totally depend 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 like house or car as security 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 and losing your assets.
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 $5,000. 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.
Don't waste your time. Get a loan online.
Who should consider an unsecured personal loan?
People who need money quickly might want to consider an unsecured personal loan. This is because the application and approval process is faster, sometimes taking just a few hours. Access to funds is typically quick, too, often within a matter of days following loan approval.
Personal loan proceeds can be used to pay for almost anything, including the following:
- Business expenses
- Home improvement projects
- Debt consolidation
- Credit card refinancing
- Vehicle purchases
- Medical expenses
- Moving expenses
- Vacations
- Wedding expenses
Advantages of unsecured loans
- The approval process is quick: With unsecured personal loans bad credit, you may be able to access your funds within a day or two of being approved.
- Unsecured loans aren’t backed by collateral: Unlike secured loans, unsecured loans don’t require collateral as backup. For example, a mortgage requires a home as collateral and an auto loan requires a vehicle for the same reason. If you default on an unsecured loan, nothing will be repossessed.
- Rates are fixed. Unlike other forms of credit, such as credit cards, which have variable interest rates, unsecured personal loans usually have fixed interest rates. This means your monthly payments will be consistent and predictable.
- Unsecured loans can be discharged in bankruptcy: If you experience an unexpected financial disaster — and earn no more than your state’s median income — you may be able to discharge the debt on an unsecured loan if you need to file for Chapter 7 bankruptcy. After bankruptcy, you might also be able to use an unsecured loan to help rebuild your credit.
Make sure your credit is in good standing. This type of loan is not backed by anything other than a borrower’s Credit and trust to repay, so an applicant’s credit history and scores are extremely important. As you’ll see in the chart below, the difference in interest rates offered to consumers who have good credit versus those who do not can be vast, and rates for low-credit consumers can be exceptionally expensive.
| Credit Score Range | Average APR |
|---|---|
| 720+ | 7.63% |
| 680-719 | 11.88% |
| 660-679 | 18.53% |
| 640-659 | 26.15% |
| 620-639 | 38.64% |
| 580-619 | 65.70% |
| 560-579 | 105.39% |
| Less than 560 | 113.62% |
What is the difference between secured and unsecured personal loans?
UNSECURED PERSONAL LOANS
- Do not require putting property or assets up as collateral, so if you default, nothing will be seized
- Often require a higher credit score and carry higher interest rates
- Typically have lower borrowing limits
- Are approved based largely on credit worthiness, but solid income and a good debt-to-income (DTI) ratio are also considered
- Include most personal loans, student loans and credit card debt
SECURED PERSONAL LOANS
- Require property or assets as collateral, which could be seized if you default
- Offer higher loan limits than that of unsecured loan.
- Are easier to obtain than unsecured loans because the lender takes on less risk if you default
- Typically include car loans, mortgages, home equity loans and home equity lines of credit
