An unsecured loan, also known as a personal or signature loan, is issued completely on the creditworthiness of the borrower. The borrower does not need to supply any collateral pledged as security for the loan. Unsecured loans are generally issued to borrowers with high credit ratings. Before applying for an unsecured loan, understand the qualifications creditors require and how to choose the right loan for you.
Learn the basics of unsecured personal loans. Amounts for unsecured loans range anywhere from $1,000 to $50,000. People get them to fund any number of endeavors, from credit card consolidation to cross-country moves or even adoptions. Creditors review your credit score to determine if you qualify for an unsecured loan and at what interest rate. Interest rates do tend to be higher for unsecured loans, so plan to pay them off as quickly as possible.
Check your credit score. Creditors grant unsecured loans to those with high credit scores. Monitor your credit score and be aware of where you stand before you apply for a loan. Understand that applying for and being rejected for credit negatively affects your credit score. Don’t apply for an unsecured loan unless you’re sure your credit is good enough.
Improve your credit score if necessary before applying for an unsecured loan. If you already have excellent credit, which is a score of 760 or better, then you don’t have to worry about trying to improve your credit. But if you only have fair credit, with a score around 680, take steps to bump it up over the 700 mark before applying for that loan.
Make sure all of your bills are paid and start paying down your debt. In the months leading up to your loan application, pay all of your bills on time and pay down your debt. If you have any late payments or other negative items on your credit, wait six months before applying for an unsecured loan to increase your chances of getting it.