How to Find the Right Lender (and Rate) for Unsecured Personal Loans

unsecured personal loans

The term “unsecured personal loans” might not make you feel too secure about taking one out.

After all, if you’re looking to borrow money, you’re probably already in a skeptical mindset. And you should be. There’s a lot of shady lenders out there looking to lock you into a bad loan agreement.

Here’s the good news: Although they might have an unfortunate name, unsecured personal loans can also be found from reputable lenders. Before we address how to find one, let’s first review why the loan is called “unsecured” in the first place.

The basics of unsecured personal loans

There are many differences between secured and unsecured loans. The key distinction is that because unsecured loans don’t require you to hand over collateral, you’re shifting the risk to the lender. Because of that, they charge you a higher interest rate.

Receiving a good interest rate on unsecured personal loans is possible. It usually requires having a strong credit history and low debt-to-income ratio. Your application could be helped by including a cosigner, too.

The other notable difference between secured and unsecured loans is how the loan is handled when you’re unable to repay it. A secured loan gone bad means your lender could keep the collateral. This is why a secured loan is more dangerous. It could cost you a personal asset like your car.

But if your unsecured loan goes unpaid, the lender will have to recoup their losses in another way. They could send the unpaid debt to a collections agency or, worse, attempt to garnish your wages by taking you to court. This isn’t an ideal outcome either, but unsecured loans typically give you more time to get back on track than a secured one.

How unsecured personal loans work

Because you’re not providing your lender with collateral, you’ll receive an unsecured personal loan based on your creditworthiness. Lenders use this factor to determine how likely you are to pay back the loan.

Your credit score is a driving force in determining your interest rate. In fact, borrowers with excellent credit scores (between 720 and 850) receive average rates between 10.30% and 12.50%, according to ValuePenguin. Meanwhile, borrowers with average credit scores (640 to 679) could receive rates between 17.80% and 19.90%.

Once you receive the loan amount in one lump sum, the clock starts ticking. Your interest rate and loan term will decide your monthly payment. A fixed rate would keep your monthly payment static, but a variable rate could cause your payment to increase or decrease over time. This means that finding a low, fixed rate offers the safest route to repaying unsecured personal loans.

Say you borrow $5,000 at a fixed rate of 18.00% and are slated to pay it back in three years. You would pay $181 per month for 36 months. Because of accruing interest, it would cost you $6,507 to borrow that original $5,000.

As with any loan, it’s important to borrow only if you need to. You’ll also only want to borrow the amount you need, and not a penny more. That’ll make repayment as manageable as possible.

How to shop for unsecured personal loans

Before shopping around for unsecured personal loans, figure out exactly what you want from your lender. You should at least have a sense of:

  • How much you need to borrow
  • How much you can afford to repay each month
  • How long it will take you to repay the balance

When you have those pieces of information handy, use our personal loan calculator to find loan terms that could work for you.

You can compare lenders based on these details:

  • Loan amount
  • Interest rate
  • Repayment term
  • Monthly payment
  • Fees

You might be happy with a $5,000 loan amount and three-year loan term, for example. But you might shy away from a high interest rate and the monthly payment it would dictate.

Remember: The stronger your credit score, the more you can dictate lenders’ offers.

As you shop around, limit the effect on your credit report by submitting only to a soft credit check. If you’re applying for a preapproval — not the loan itself — most lenders won’t do a hard check. The lender might not make this distinction obvious on the loan application or its website FAQs, so ask about their credit review policies before proceeding.

Once you have preapprovals in hand from contending lenders, you might take their loan offers back to our personal loan calculator. Then, you’ll be able to separate the best offer from the rest.

How to find top lenders for unsecured personal loans

It’s fine to start your search for lenders on Google or another search engine. But watch out for the red flags of shady personal loan companies. These might include extremely high rates, hidden fees, and inflexible loan terms.

If you do find a lender that offers the loan terms you’re seeking, do a background check on the company. You can use crowdsourced review sites like TrustPilot to ensure the lender hasn’t been accused of scamming customers. You could also test the lender’s customer service. If they’re slow to respond or are unhelpful, you might take your business elsewhere.

If you started with a search engine and found a loan offer you like, compare its preapproval offer with traditional lenders’ offers. Personal loans, unsecured or otherwise, can be found via local and national banks, nonprofit credit unions, and online companies.

Each type of lender offers something different. SoFi, one of our recommended personal loan companies, forgives a late fee if you’ve made three straight timely payments. Earnest, to name another example, offers personal loans without any origination, late, or early-payment fees.

No two lenders offer the same exact perks. Plus, you might value a loan feature that another borrower couldn’t care less about. That’s why it’s important to find the right lender for your situation. If you have a solid credit score but are still working on advancing your career, for example, you might appreciate a lender like Upstart, which takes your earning potential into account.

Consider your unsecured personal loan options

Borrowing money should likely be your last resort because it requires taking on debt. If you’re in a bind, there are quick-cash alternatives to taking out a loan.

But if borrowing is your best or last remaining option, you might find that an unsecured personal loan is the best way to do it. That could be the case if you have the credit score to land a low interest rate, plus the regular income to make your monthly payments with ease.

If you’re unsure about whether borrowing is right for you, review the pros and cons of unsecured personal loans before making your decision.

Interested in a personal loan?

Here are the top personal loan lenders of 2018!
LenderRates (APR)Loan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Finance Lender Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (
  2. Personal LoansFixed rates from 5.49% APR to 14.24% APR (with AutoPay). Variable rates from 4.98% APR to 11.44% APR (with AutoPay). SoFi rate ranges are current as of December 21, 2017 and are subject to change without notice. Not all rates and amounts available in all states. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 4.98% APR assumes current 1-month LIBOR rate of 1.34% plus 3.89% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.

2 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate Disclosure: Fixed interest rates range from 5.99% – 16.24% (5.99% – 16.24% APR) based on applicable terms and presence of a co-applicant. Lowest rates shown are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.
7.39% - 29.99%$1,000 - $50,000
Check rate nowon SLH's secure site
4.98% - 14.24%1$5,000 - $100,000
Check rate nowon SLH's secure site
8.00% - 25.00%$5,000 - $35,000
Check rate nowon SLH's secure site
5.99% - 16.24%2$5,000 - $50,000Visit Citizens
5.99% - 35.89%$1,000 - $40,000Visit LendingClub
5.25% - 14.24%$2,000 - $50,000Visit Earnest
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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print, understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.