An unsecured personal loan is something many consumers consider. It’s a loan that doesn’t require collateral such as a car, a home, or a piece of property. This means the rates you’ll pay to secure the loan are much higher than they are when you choose a secured loan with a tangible asset the lender can take from you if you default on repayments. If you choose to apply for an unsecured loan, you have many options. You might also face some hurdles if you have low credit, no credit, or you have low income. Before you decide a personal loan of this nature probably isn’t for you, take a few moments to become familiar with how you can obtain a loan of this nature so you can seek the financial means you need to cover expenses.
It’s also important to note personal loans are good for anything. You may consolidate your debt, pay off some medical bills, buy a new car, finance a vacation, or do anything else you want with it. It’s a great way for you to find the cash you need when you need it the most. If you’re interested in applying for an unsecured personal loan, this information might help.
Check Your Credit
Unsecured loans are all but impossible to secure if your credit is bad. Unlike a lender willing to provide you with a loan for a home or car, personal loan lenders have nothing to take from you. They can recoup their money by repossessing a car and selling it to pay off the loan or a home to sell to pay off a loan. They can only hope you’ll return the money you borrowed in the manner you promised, so they are very careful about finding the right borrowers.
If you think you have good credit, it’s time to check. Even if you’re certain you’ve never missed a payment or made a late payment, there’s a good chance you could still have some errors on your credit report. Reporting agencies make errors all the time, and you must correct them before you’re turned down for a loan. Each of the major credit bureaus is required to provide you with a free copy of your credit report annually, and you should take advantage of that every few months so you can keep track of your credit the best way you know how.
Repair any issues you find on your credit report, and then apply for a loan. If your score is lower than you thought, you might want to take the time to consider how you can raise it. You can pay off some debt to lower your debt-to-income ratio, consolidate multiple student loans into one student loan, and you can even wait a few months and make all your payments on time and in full to help raise your score. It might not go up by much but if you’re right on the edge of good and great, you might want to see if you can spend a few months pushing that score to the great mark for lower rates.
Poor Credit Loans
If you have poor credit, you’re going to find it’s difficult to secure a personal loan from your bank or other lending company. This is when you try a credit union. They’re more open to working with customers who have bad credit or challenged credit, because they look past your score. You’ll want to apply for a small loan of $2,500 or less with bad credit, though. It’s typically the only way you can obtain a loan like this with bad credit.
What You Need
- Photo identification
- Address verification
- Proof of income such as tax return or a bank statement
- Monthly debt
- Gross income
- Employment information
This is the most common information lenders ask for when you apply for a loan. Now’s the time to gather this information and find a lender you want to work with. The personal loan business isn’t long, but you do need specific information on hand if you want it handled quickly.
If you have great credit, you’ll receive a low rate. If your credit is a bit lower, you might receive a higher rate but not necessarily a denial. Find out what the parameters for approval are before you apply for a loan like this so you don’t damage your credit more with a hard inquiry.