If are looking to get an unsecured loan, then there are a few factors that will apply to you. Those factors are covered in this article, along with reasons why you should apply for an unsecured personal loan rather than consider other credit options. There is then a list of the places you should try in order to get an unsecured personal loan.
You Are Not Going To Lose Any Assets If You Do Not Repay The Loan
One of the main benefits of having an unsecured personal loan is that you do not lose your house, car, business, stock, life insurance money, or investments if you do not repay the loan. The credit company will come after you with all the tools at their disposal, but you have not promised to pay them back with an asset you own (as is the case with secured loans), and so you are not going to lose anything right away if you do not repay your unsecured personal loan. You may lose something eventually if you get a judgment against you and they send the bailiffs around to your house.
An Unsecured Personal Loan Is Typically For A Lower Amount
Since you are not promising to give something up in return for not paying back your loan, then it stands to reason that creditors will lend you less. If you own a house and you secure your loan against it, then the creditor will probably lend you a large portion of the value of your house, but with an unsecured loan, you are making a promise. Your credit rating is a record of how well you keep your promises.
You May Be More Eligible If You Are Buying A Seizable Asset
There are numerous different types of unsecured loans, and some of them are to buy things such as a car. If you are buying a car and you are borrowing money specifically for that purpose, then your creditor may lend you the money because you are about to buy a seizable asset. If you are going to buy a car, then the creditor may create an unsecured loan with the assumption that your car may be seized or that your car will be up for grabs when the bailiffs arrive.
It is reasons such as this why creditors ask you what you are going to use the money for. Part of it is to check you are not going to do something stupid, or to check to see if you are going to start a business (because that is not in the unsecured personal loan category), and to check to see if you are going to buy a seizable asset. They may be more willing to give you an unsecured loan or give you a better rate if you are buying a seizable asset.
Your Credit Rating Will Play A Big Role In Your Interest Rate
If you want an unsecured personal loan, then your credit rating will determine what sort of interest rate (or APR) you pay on your debt. People with a good credit rating will receive better interest rates. People with poor credit will be stuck with interest rates above 30% for their unsecured personal loans.
People with a good credit rating will receive better interest rates. People with poor credit will be stuck with interest rates above 30% for their unsecured personal loans.
Before you even think about applying for a personal loan, make sure you know your credit score; your potential lender will be looking at it. These days you can easily check your credit for free with websites/apps like Credit Sesame. So there is NO reason to be in the dark about your credit.
Your Credit Rating May Play A Part In How Much You May Borrow
If you have a good credit rating and a good credit history, then you may be able to borrow more than if your credit history is tarnished. The amount you apply for is the amount that is considered, but a poor credit rating will mean higher amounts may be refused.
Your Income And Your Budget Will Determine Your Loan Amount
If you have had your job a long time, if you have been at your current address for three years, if you have a fairly good income, and if your expenses allow for a reasonably good amount of liquid cash, then you may be able to borrow more. How easily you may repay the loan, and how quickly you are able to repay the loan will have an impact on how much your creditor says you are allowed to borrow.
The Length Of Your Loan May Make A Difference
How long you have your loan for will increase the amount you owe the creditor, which is bad. However, a longer term means smaller monthly payments that are easier to afford, which is good. It is a balancing game between how much you borrow and how easily you may afford the payments.
Unsecured Loans Are Harder To Get, But Easier To Pay Off
The great thing about an unsecured personal loan is that it is rarely for tens of thousands, which makes it easier to pay off. Plus, unlike credit card debt, your unsecured personal loan will one day be paid off if you keep up the minimum payments. If you wish to pay it off sooner, then simply add more money when you pay. Just make sure there are no penalties for early repayments.
Credit Cards Are Far Worse Than Unsecured Loans
If you max out a credit card, you can spend the rest of your life in debt. For example, if you have credit card debt of $3600, and you pay $90 per month in interest, then you may pay that interest for the rest of your life without ever paying off the debt. A personal loan will end eventually if you make the minimum payments, but credit card debt will not. In addition, there is always the temptation to spend the money you build up on your credit card, whereas you cannot spend the money you pay back to your loan.
An Overdraft Will Beat An Unsecured Personal Loan Almost Every Time
There is a list below that features a number of ways you may gain unsecured credit. An arranged overdraft is a great way of gaining unsecured credit, but it is not mentioned in the list below. The reason is because an overdraft is a tool that should be used for its intended purpose. Unless you need the money for some form of recurring expense, you should probably avoid using an overdraft as a way of getting unsecured credit.
Where Should You Apply For A Personal Loan
Below is a list of ways you may gain credit, be it through an unsecured loan or unsecured credit, and each one is numbered. They are in order of preference. If you are looking for credit, then the lower numbers (one, two, three, etc.) are more preferable than the higher numbers (six, seven, eight, etc.). This list is in order of preference. The options that are higher on the list are the methods you should consider first.
This list is not an order in which you should apply. For example, you shouldn’t apply for a loan with your bank, then with a P2P company, then with a credit union and so forth. If you pick an option and are turned down, then take a step back, build your credit rating, and wait six months before trying to get credit again. Once again, this is not a list in the order you should apply, please do not send comments saying that you tried option 1, 2, 3, 4… in a week and now your credit rating is ruined because that is not what is being suggested here.
1-Your Bank In Which You Have An Established Account
Go to for High Street bank where you have had an account for years. They should be your first port of call. You may be able to apply online and have the money in less than 24 hours if you are in good standing with your bank, if you have a good credit rating, if you have a job, a place to live and a reasonable amount of liquid cash in your monthly budget.
If you are worried about your loan because your credit rating is not so hot, then make an appointment with somebody at your bank, try to create a rapport with the bank worker, and try to get a loan that way. Do not try banks that you do not already have an account with because despite their online claims, they will show you the door.
2 – A Peer-to-peer Lending And Investing Group
If you have a good credit rating or you have overdrawn with your bank a few too many times, then a P2P lending group is just what you need. They can offer you some fantastic deals. In many cases, you may choose the interest rate that you pay, you may choose the length of your loan and the amount. The interest rates are amazing, and the range of choice you have is brilliant.
The bestPeer to Peer lenders, so far, are The Lending Club and Prosper.
3 – Visit A Credit-Rating Powered Comparison Website
You may wish to consider a private company or a variety of different lending institutions. Using comparison websites to find lenders is not a terrible idea, but many comparison websites are going to direct you towards the companies that pay them the most referral money. That is why you should try a comparison company and is also a credit checking company.
They are not companies that create or monitor your credit score, they simply retrieve your credit score for free. Once you are signed up, they give you your credit score and part of your credit history and they do it for free. You do not have to sign up for a free trial or anything of that nature; they give you the information for free.
They also have a series of comparison tools that help you pick car insurance, life insurance, utilities, credit cards, loans and things of that nature. They use your credit rating to judge which companies are the most likely to offer you an unsecured personal loan.
4 – Credit Unions
Credit unions are good at offering loans with low interest rates, but they often opt for people with higher credit (FICO) scores because they are not in the habit of taking big risks. They are also more restrictive with regards to what you are able to spend the money on and how long you may have the loan for. For example, they may demand that your loan for a new car may only last 60 months at the most, and for that they will offer you a rate that is 20% lower than what your bank has offered. Credit unions make it very difficult to get a loan with all the paperwork they present and the hurdles they make you jump. They may damage your credit rating by refunding you for something as simple as you being ill prepared or because you didn’t dot all the “i”s and cross all the “t”s.
5 – Credit Card Debt
Credit cards offer very easy-to-attain unsecured credit. Credit cards are probably easier to get than any other form of credit on this article, and the credit you receive is unsecured because you are only making a promise and nothing more. It is near the bottom of the list because credit card debt is the hardest to get out of.
6 – A Trade Credit Cards
If you know the credit biz, then seeing trade credit cards feature as low as this may be a little frustrating. If you know all about credit and debt and such, then you will know that trade credit cards are usually a good thing. They are not unsecured loans, but they are unsecured credit. They are also great for people’s credit ratings if they are used correctly.
The reason that trade credit cards are so low down this list is because they are dangerous for people who do not manage their debt very well. If you use your trade card to buy your supplies, you make your profit, and you pay back the card, then it will do your credit rating wonders. However, if you spend on the card and do not repay it within a set limit of time, then the issuing company or bank will happily remove the entire amount owed from your checking account (your current account) and leave you in a world of overdraft hell. That (and that alone) is the only reason why trade credit cards are not higher on this list.
7 – Finance On The Item You Wish To Buy
If you want a terrible interest rate where you may end up paying more than you do with a credit card, then get finance on the item you wish to buy rather than getting an unsecured loan. It is not a pretty option and should only be used in conjunction with a special offer that helps knock a large amount off your purchase.
8 – Unsecured Loans For People With Poor Credit
Be very careful when borrowing from companies that offer loans to people with bad credit. The interest rates are often terrible, the terms are diabolical, and the amount you pay back is often twice what you borrow. If it has come to you considering a company that has interest rates (APR) above 30%, then seriously consider not borrowing any money at all and start saving instead.
Conclusion – If At First You Don’t Succeed, Wait Over Six Months
If you try one of the methods that are listed above and you are turned down, you should wait over six months before you try again. Typically, if you are turned down by one company, then it looks bad on your credit rating. If you are turned down by two, then it looks even worse. If you are turned down by three companies within the space of six months, then it is going to negatively affect your credit rating, so wait six months before you apply again.
During those six months, work on improving your credit rating so that you are more likely to get credit. In addition, you will have been in your job six months longer, which will work in your favor when applying in the future.