An unsecured personal loan lets you borrow money without having to put up items you own as collateral. Here’s what to know about unsecured loans.
Sourced from: www.nerdwallet.com
Personal loans are a growing category of credit and lending. Traditionally U.S. consumers would turn to credit cards for short term needs but today households are turning to the personal loan market when they need cash, whether for a milestone event, such as a wedding, or to consolidate debt into a more manageable, lower rate.
There are two basic types of personal loans, which incur two different types of debt. There are secured and unsecured personal loans. WisePiggy addressed the difference between the two types in this article from 2016. Which type of loan you choose depends on what you are trying to finance.
Unsecured personal loans make sense if you qualify for an affordable rate and you don’t want to put up collateral. They work best for specific one-time needs, such as consolidating debt or funding home improvements. Our friends at NerdWallet did a good job addressing the pros and cons of unsecured loans as well as many other key aspects to consider, including where to get unsecured personal loans, how to qualify and typical rates, fees, and terms on unsecured loans.
One of the most important ways to ensure you’ll qualify for an unsecured personal loan at the best interest rates is to build your credit. Lenders weigh your credit score more heavily if there’s no collateral securing a personal loan. Work on improving your credit before applying.
Also, you might want to check your credit reports for errors that may be hurting your score, and if you find any, dispute them. You can get your credit reports for free through our friends at Credit Sesame.