Unsecured Personal Loans

   
   
 

Personal loans, which are also known as signature loans, are usually approved based on the borrowers ability to repay the loan in addition to their credit history. When a loan is unsecured, it means there are no collateral assets required.

The purpose of an unsecured personal loan is usually for debt consolidation, home improvement, paying for education, medical bills, or cash. Loan rates are not based on owning a home or using home equity, because the loans are not secured by a lien against property.   

A personal loan may have a fixed interest rate with the funds available in one lump sum, or it may be a line of credit with a variable interest rate, and the money can be withdrawn in different amounts as needed. Loan approval is typically quick, usually from 1 to 3 business days.

Some things to keep in mind when comparing loans: consider the total cost of the loan and not just the monthly payments, make sure all the terms of a unsecured personal loan are in writing, and not verbal promises, and look for any hidden loan fees in the estimate of closing costs.

Personal loan rates are typically higher than home equity loans, because they are generally considered a higher risk, since there is no collateral security. Also, lenders may charge a periodic loan service fee, the term is usually shorter, and the interest paid is not tax deductible.