February 11, 2016

11 Best Unsecured Personal Loans Online (2018) – Search & Compare Different Loan Offers

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People seek out unsecured personal loans for myriad reasons. Some borrowers have quite a number of small bills that they must pay each month. They use personal loans to consolidate these bills (including their credit card bills). By going this route, they reduce their monthly payments down to one (the loan payment).

Others have a big life event that they need to pay for, like a wedding or even a funeral. Big ticket expenses like these can really put a strain on a person, both personally and financially. Being able to find a personal loan to cover these expenses can really offer the borrower significant relief during a stressful time.

In all actuality, some borrowers even use personal loans to pay for a major purchase, like a car or motorhome. These borrowers go this route, rather than getting a traditional auto loan because the rates are so good. In these cases, unsecured personal loans offer would-be borrowers plenty of flexibility, especially now given the number of loan opportunities they can find online.

The transactions for these loans take place 100% online and give borrowers the convenience of being able to shop for an unsecured personal loan from any device they have that can access the Internet. The online option can be particularly helpful for the unconventional borrower who wants to use the loan for a purchase, like a car or who wants a smaller-than-normal loan amount.

If you count yourself among those borrowers who are looking into personal loans online, read on. You’ll find out what steps you need to take to make that happen.

1. Take Stock of Your Finances

If you have good credit, this part will be fairly easy. You can start researching loans that might be right for you.

If your credit isn’t where you want it to be, you’ll want to work on it a bit. Your first step should be taking a look at your credit score. If your score falls below 630, you may want to hold off on applying for the loan until you can bolster it up a bit.

Here is how credit scores break down:

  • 750 and higher is considered excellent
  • 700 to 749 is considered good
  • 650 to 699 is considered fair
  • 550 to 649 is considered poor
  • 550 and lower is considered bad

Your credit score will improve if you do some simple things. First, make sure that you always pay your bills on time. Late payments hurt your credit. Second, try to keep your debts under control: If you have too big a debt-to-income, you’ll turn lenders off. Third, try to keep your new credit applications to a minimum to avoid the inevitable hits your credit will take.

After you run a check of your credit, it’s imperative that you take a look at your personal budget. Since getting an unsecured personal loan will require you to disclose your personal budget (to a certain extent), it’s important that you have that aspect of your finances under control.

Lenders want to see that you have room in your budget for a loan. You don’t want to be surprised come loan time: Don’t get turned down for a loan because your credit-to-income ratio is too high.

Do be aware as well that lenders take a couple of factors into consideration when they are deciding to give you a loan. They are:

  • How old you are. No one under the age of 18 will qualify for a loan. Many lenders even restrict borrowers who are under 21 years of age from borrowing. Generally speaking, if you are a minor, no lender will loan you money.
  • Your employment status. The lender will need to know where you work and how long you’ve worked there. The longer you’ve worked at a job, the more stable you look. The more stable you look, the better chance you have at getting a loan.
  • Place of residence. Some lenders will look at this for the same reason they look at the information above. They want to know that you’ve lived in a place for a while. You look more stable if you have lived in a place for a while.

2. Types of Unsecured Loans

Once you feel confident about your credit and your budget, take the time to research the different unsecured personal loans you find online. Now is the time to explore the different types of loans available to you, including loans for small amounts.

Typically, people looking for personal loans online are interested in getting signature loans. These loans don’t require any collateral to get. Rather, they require you to have an excellent credit score. In the brick-and-mortar world, you’ll find these types of loans at lending institutions, like credit unions and banks.

If your credit is less-than-optimal, signature loans are a little more challenging to come by but you can still qualify for a bad credit personal loan. Some would-be borrowers can also get around with bad credit by either getting a secured loan or asking someone to co-sign on the loan with them. These types of loans tend to be less of a risk for lenders because they have a chance of getting their money back if the buyer can’t pay.

They do have some drawbacks, of course. First, if you have enough money in the bank to back a secured loan, you probably wouldn’t be applying for a secured loan. Additionally, if you feel like you need a loan right away, this plan won’t work for you, as it takes time to rebuild your credit.

Finally, if you’re trying to go the co-signer route, you have to be willing to find someone to co-sign for you, which may not be an easy thing to do. And as with all loans, the trick to making this work is paying on time. The more you pay on time, the better chance you have at getting an unsecured loan in the future.

Both of the types of loans can come with a fixed interest rate or a variable interest rate, depending upon the lender. Many people gravitate toward the fixed interest rate loan because they know how much they have to pay with each payment. They’re never surprised by their loan amounts, which can happen with a variable interest rate. These types of loans usually require a monthly payment over a year or more, depending on how large the loan is.

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3. Precautions

In reality, there are more than just two types of loans. That said, the loans that will be covered in this section do offer borrowers the option to borrow if they have poor credit. However, they usually come with a bit higher interest rates, making them prohibitive for many borrowers in the long run.

The first of these types of loan is the car title loan. It requires you to use your car as collateral for the loan. While getting this type of loan can be a relatively simple affair, the cost of not paying off this loan is steep. You lose your car. Depending on the size of the loan you’re asking for, you may have a series of payments, just as you would with a secured or unsecured personal loan.

Similar to the auto title loan is the payday loan. This type of loan counts as a very short-term loan. Usually, you write the company a post-dated check that will be cashed on or after payday. (This is where the name comes from.)

Although it is expected that the borrower will pay the loan back on the next payday, these lending establishments do allow the borrower to make smaller payments until the loan is paid off. The interest rate remains high, making it financially prohibitive to go this route unless you have run out of options.

It’s also appropriate in this section to caution online borrowers of the potential dangers of borrowing money online. As with any type of situation involving money, you want to do your homework.

During the research stage of your search, look into all lenders that interest you. Do they have a BBB page? Are there legitimate online reviews of them? Do they ask you for a payment before they’ll do business with you? (That’s a big red flag.) Also, it’s generally better for you to go looking for personal loans online rather than the other way around, meaning it’s best that you not respond to unsolicited emails to apply for a loan. These could be online scams.

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