Want to Make STACKS of Cash?

Join the weekly Finance Stacks newsletter for expert advice on stacking extra cash.

Error subscribing. Try again! Your subscription could not be saved. Please try again.
Congratulations it's time to start stacking money. Congratulations it's time to start stacking money. Please check your inbox for the confirmation email.

Best Unsecured Loans 2024: Compare No Collateral Loans

Written by:  Joe Chappius
|
Reviewed by:  Sam Onelia
Last updated: August 30, 2024

We help you find the best unsecured loans and apply online. With Financer.com you can:

  • Use our online loan comparison tool
  • Compare rates from the best online lenders
  • Apply for an unsecured loan of up to $35,000

Start Comparing

How much would you like to borrow?

What Is an Unsecured Loan?

In the world of personal finance, unsecured loans play a crucial role in providing financial flexibility to borrowers.

Best Rated Unsecured Loans:

Understanding Unsecured Loans

Unsecured loans are financial products that don’t require collateral, such as a home or car, to secure the loan.

This type of lending is based primarily on the borrower’s creditworthiness and ability to repay.

Key Features of Unsecured Loans:

  • No collateral required
  • Often called ‘signature loans’
  • Typically higher interest rates than secured loans
  • Based on creditworthiness and income
  • Includes personal loans, student loans, and credit cards

Unsecured loans are often referred to as “signature loans” because the borrower’s signature and promise to repay are the primary requirements, assuming they meet the lender’s criteria.

Important Note:

Unsecured loans typically carry higher interest rates compared to secured loans. This is because lenders assume more risk when approving a loan without the backing of any assets.

Unsecured Lenders Comparison

Company Overall Rating
4.2 Explore more
4.9 Explore more
5.0 Explore more
4.6 Explore more
5.0 Explore more
Get Started
Explore more
Explore more
Explore more
Explore more
Explore more
Company Overall Rating Get Started
4.2 Explore more
4.9 Explore more
5.0 Explore more
4.6 Explore more
5.0 Explore more

Compare loans from 79 lenders

Find the cheapest rate with one click

How Unsecured Loans Work

When issuing unsecured loans, lenders conduct a thorough evaluation of the borrower’s financial profile. This assessment typically includes:

  • Credit score and history review
  • Employment status and income verification
  • Analysis of current debt-to-income ratio

If any of these factors don’t align with the lender’s requirements, the loan application may be denied.

Common Types of Unsecured Loans

    Examples of Unsecured Personal Loans

  • Credit cards

  • Personal lines of credit

  • Home improvement loans

  • Student loans

  • Payday Loans

Unsecured loans generally involve minimal paperwork and offer a quick approval process. Additionally, borrowers don’t risk losing any property since there’s no collateral involved.

Quick Tip:

Use the Financer.com loan comparison tool to compare 304 lenders. See immediate results without affecting your credit score.

It’s important to note that unsecured loans are best suited for short-term emergencies and should not be considered a solution to serious financial troubles.

Advantages and Disadvantages of Unsecured Loans

    Disadvantages of Unsecured Loans

  • Lower borrowing limits

  • Higher interest rates for low credit scores

  • Stricter approval process

Secured vs Unsecured Loans: Understanding the Difference

Secured loans differ from unsecured loans in that they require assets as security for the loan. This fundamental difference impacts various aspects of the loan:

FeatureSecured LoansUnsecured Loans
CollateralRequiredNot required
Approval ProcessOften easierMore stringent
Interest RatesGenerally lowerTypically higher
Risk to BorrowerCan lose collateralNo asset at risk

How to save $619.00 on your loan

The price difference for a $500.00 loan in 90 days is $619.00.

Find out how

How to Qualify for an Unsecured Loan

To minimize risk, lenders carefully evaluate several factors when considering an unsecured loan application. Here’s what they typically look at:

1. Your Credit Report

Lenders review your credit report to assess your credit management skills, including:

  • Payment history
  • Credit utilization
  • Types of credit accounts

Credit Score Tip:

Borrowers with credit scores of 700 or higher typically qualify for the best interest rates on unsecured loans.

2. Your Assets

Although unsecured loans don’t require collateral, lenders may still consider your assets. Substantial savings or investments can indicate financial stability and lower risk.

3. Your Income

Lenders assess your income to ensure you can comfortably manage loan repayments. They also calculate your debt-to-income (DTI) ratio:

How to Calculate Your Debt-to-Income (DTI) Ratio

Your DTI is an important factor in loan approval. Here’s how to calculate it:

Step 1

Sum Monthly Debt Payments

Add up all your monthly debt payments (e.g., existing loans, credit cards).

Step 2

Determine Gross Monthly Income

Calculate your total monthly income before taxes and deductions.

Step 3

Divide Debt by Income

Divide your total monthly debt by your gross monthly income.

Step 4

Convert to Percentage

Multiply the result by 100 to get your DTI percentage.

Example:

If you have $600 in monthly debt payments and a gross income of $2,000 per month, your DTI would be:

($600 / $2,000) x 100 = 30%

Most lenders prefer a DTI of 36% or less, though some may approve up to 46% for certain loan products.

Unsecured Loans for Bad Credit

If you have a low credit score, you may still have options for unsecured loans. Some lenders specialize in offering loans to borrowers with less-than-perfect credit. However, it’s important to be aware of the potential drawbacks:

  • Higher interest rates
  • Lower loan amounts
  • Shorter repayment terms

Important:

Always compare loan offers from multiple lenders to find the best terms, interest rates, and fees, especially if you have bad credit.

Unsecured Installment Loans with No Credit Check

Some lenders offer unsecured installment loans with no hard credit check during the pre-qualification process.

This allows you to see potential loan offers without impacting your credit score. However, be cautious with these types of loans, as they often come with higher interest rates and fees.

Frequently Asked Questions About Unsecured Loans

Can I get an unsecured loan with bad credit?

Yes, it’s possible to get an unsecured loan with bad credit, but you may face higher interest rates and lower loan amounts. Some lenders specialize in bad credit loans.

How quickly can I get approved for an unsecured loan?

Many online lenders offer quick approval processes, sometimes within minutes. Funds can often be deposited into your account within 1-3 business days after approval.

Are there any alternatives to unsecured loans?

Yes, alternatives include secured loans, credit cards, or borrowing from friends or family. Each option has its own pros and cons, so consider your specific financial situation before deciding.

How does an unsecured loan affect my credit score?

Applying for an unsecured loan typically results in a hard inquiry on your credit report, which may temporarily lower your score. However, making timely payments on the loan can positively impact your credit score over time.

Understanding unsecured loans is crucial for making informed financial decisions. Whether you’re considering a personal loan, student loan, or credit card, it’s important to weigh the pros and cons and compare offers from multiple lenders.

Remember, while unsecured loans can provide quick access to funds, they should be used responsibly and not as a long-term solution to financial difficulties. Always consider your ability to repay before taking on any new debt.

Our Commitment to Transparency
At Financer.com, we're committed to helping you with your finances. All our content abides by our Editorial Guidelines. We are open about how we review products and services in our Review Process and how we make money in our Advertiser Disclosure.
Author Joe Chappius

Joe is a seasoned financial adviser with over a decade in the industry, and Head of the US Market at financer.com. Throughout his career, he's directly assisted families, high-income individuals, and business owners with their financial needs. Joe draws on his wealth of client-facing experience to author insightful and high-quality financial content.

Financial information reviewed by Sam Onelia
Share on

Unsecured Loans FAQs

What is an unsecured personal loan?

An unsecured loan is simply a personal loan that doesn't require any collateral. 

Why does an unsecured loan have a higher interest rate than a secured loan?

In short, lenders take on more risk with unsecured loans as they are not backed by collateral.

What happens if you don't pay back an unsecured loan?

Most lenders charge hefty late penalties. If your loan remains unpaid for a few months, you may be handed over to a debt collector. If you still don't make your payments or agree to suitable payment arrangements, you may be summoned to appear in court. If a judgment is issued against you it can remain on your credit report for up to 10 years.

hy are student loans considered unsecured?

There is typically no collateral required for a student loan, which is why they are considered unsecured loans. However, when it comes to non-payment these loans are not always treated the same as other unsecured loans. Failure to pay a student loan can result in a judgment against the consumer and may also include the garnishment of wages.

What are the best unsecured loans?

This will depend on each borrower’s individual needs and financial situation. Unsecured loans include personal loans, student loans, and personal lines of credit. Always compare loan rates and terms to find the best loan offer from lenders.

Was this article helpful?

Be the first one to give feedback

How can we improve this article? Your feedback is private.

We use cookies to give you the most relevant experience. By using our site, you accept all cookies and our privacy policy. To find out more about what cookies we use you can go to privacy overview