There are many reasons you might need to get a personal loan from financing a wedding to consolidating your credit card debt. An unsecured loan can range from a few thousand dollars to over $50,000 to $60,000 depending on the reason for the loan. When you have good credit, you’ll be able to obtain a loan in the amount you desire with the best interest rates.
No Need for Collateral
Applying for an unsecured loan means you don’t need collateral, but it also means that you’ll have to rely on your credit score to ensure the best rates on interest. The interest rate is higher when there’s no collateral securing the repayment of the loan. The amount of debt you have versus the income you bring in each month can have an impact on the loan amount you’re given as well as whether you’re even approved too.
Good Credit and Lenders
There are many lenders who focus on providing loans for people with great credit scores. They’ll offer more affordable rates than other lenders. For those who are suffering from an average credit score, these same institutions might refuse to provide a loan or quote high interest rates for the borrower. Credit unions might be able to offer affordable rates for people with middle-of-the-road credit scores. If you don’t have the best credit score, credit unions would be a great place to start your search for an unsecured loan.
Poor Credit Loans
With a bad credit score, you can still get a loan, but you could have to provide some collateral or have a co-signer for the loan. This person will be responsible for paying the loan if you’re unable to make payments. You’ll still end up with very high interest rates, which could top as much as 36 percent.
Documents to Provide
You’ll need identification like a passport, license or state ID as well as a social security card. The lender will also ask for a verification of address, which might take the form of a utility bill or a copy of your lease agreement. Lastly, the lender will want bank statements, pay stubs or tax returns as proof of income. Identification, past income proof and verification of address are vital to securing a loan. Bring them with you to the lender.
Things to Consider
Credit Card Balance
Before applying for a personal loan, pay off your credit card balance if possible. A high balance on your cards will work against you when you’re applying for an unsecured loan. While you may have plans to pay the balance in full at the end of the month, the lender sees a high balance anyway.
While you might believe your bank will treat you better than another, you should always comparison shop. You might be surprised to learn that your bank doesn’t have the best rates. Online lenders might be the best place for an unsecured loan. Always check reviews and the Better Business Bureau to ensure you’re going with a proper lender with good practices.
While comparison shopping, read the fine print on the agreement to ensure that you’re not being charged for prepayment penalties. This is a fee that you’re charged if you pay the loan before a certain date.
An unsecured loan can help when you require a large amount of money immediately, but you can run into problems if you’re not careful. It’s important to borrow what you can repay on time, and comparison shop to find the best rates based on your credit score.