Unsecured Personal Loans: The Best Funding Option

Unsecured personal loans are flexible and reliable products that can help you invest in your objectives and goals. They present less risk to the borrower because they don't have to put up their assets as collateral. In this post, we delve into the world of unsecured personal loans to help you get the best funding available and eliminate any concerns you have about applying for this type of loan. Apply For An Unsecured Loan!

What is an Unsecured Personal Loan?

Most borrowers are reluctant to risk their personal and business assets. That's why they prefer getting unsecured personal loans, which don't require collateral. Lenders only approve a loan when they're sure the applicant can make monthly payments comfortably. Since unsecured personal loans do not require an applicant's assets as security, lenders look at an applicant's:

• repayment history
• personal and business credit scores
• income
• liabilities
• other indicators of creditworthiness

Now that you know what is an unsecured personal loan let's analyze its pros and cons.

Pros and Cons of Unsecured Personal Loans

Pros

• Low-risk investment. Unsecured personal loans don't jeopardize your ownership of personal assets. If you fail to pay back the loan, you don't run the risk of losing your home, checking and savings accounts, or vehicles.
• Convenience. Personal-unsecured-loan lenders are available close to where you live and online. Most have streamlined their application process so you can easily apply and upload documents.
• Proceeds flexibility. There are very few restrictions on how you can use personal loan money. You can consolidate debt, renovate your home, or purchase rental space for your business.
• Readily available. Anyone can apply for this type of loan whether you need the funds to pay off medical expenses or take your business to the next level with an influx of cash.
• Quick access to money. You can apply for funds one day and have the cash deposited into your checking account within a matter of days.

Cons

• Higher interest rates. Lenders might charge more interest because they assume more risk to fund an unsecured personal loan. The higher rates put them in a better financial position if a borrower doesn't repay.
• Loan amount limits. Lenders can charge higher interest rates on unsecured personal loans. They might also loan reduced amounts. Only people with excellent credit get the lowest rates and highest amounts for personal unsecured loans.
• Credit history damage. If you can't repay your loan,  you could ruin your credit score.
• Collection agency. A lender could sell your loan balance to a collection agency that may try to sue you to collect the debt. Some debt collectors resort to wage garnishment or putting a levy on your bank account.
• Other Factors. Once you agree to the repayment terms, you can't negotiate the monthly payment to a lower amount. If you decide to pay off the loan early, some lenders charge prepayment penalties. The eligibility criteria can be stricter, preventing some customers from getting the funding they need.

Secured vs. unsecured business loans: which is better?

Unsecured Personal Loan Rates

Interest rates average between 4.99% to 55.99% for unsecured personal loans.  The rate you receive will depend on several factors, like your credit score and the lender you choose. Take a look at this table to see how a credit score can affect an unsecured loan's APR.

Source: LendingTree Personal Loan Offers Report, June 2021

#DidYouKnow Credit scores lower than 640 are usually considered fair or even bad scores, which means you might face higher interest rates.

Lenders offer lower rates for individuals with excellent credit scores and financial stability. A lower rate could represent a savings of hundreds if not thousands of dollars over the life of the loan.

Unsecured Personal Loan Requirements

Loan requirements vary per lender. That said, most personal-unsecured-loan lenders require the following common prerequisites:

Good credit

Usually, lenders want to see a minimum credit score of 670.

#DidYouKnow A credit score reflects a person's payment history, how much debt they have, and how long they've established credit history.

Low debt-to-income ratio

The preferred debt-to-income ratio (DTI) is about 36%.

This ratio represents how much of a person's monthly income they use to pay down debt. It also gives a lender an idea of how likely a borrower can repay a loan and continue to make payments on existing bills.

#CaminoTip You should allocate no more than 28% of your DTI to a rent or mortgage payment.

Stable credit history

You can show lenders that you consistently pay your bills on time. Maintain a constant credit score from year to year for several accounts.

Steady Income

Another positive indicator of your creditworthiness is your income. Regularly earning money is one way a lender verifies your financial health.

Social security number

An SSN issued to US citizens makes a lender's job easier because they use it to run a credit check and view your credit history.

Fortunately for you, some lenders accept ITINs too.

Types of Lenders that Offer Unsecured Personal Loans

You might be wondering where to get a personal loan. These are the most common types of personal lenders:

Online lenders

Many people prefer digital lenders because they offer a quicker, easier, and more modern application process.

Many online lenders accept applicants with lower credit scores.

Most online lenders do a soft credit check which won't harm an applicant's credit score.

Banks

These financial institutions are near your home or business and offer many types of services and products. The disadvantage with banks is that their

• rates are usually higher
• requirements are more stringent
• the lending process can be quite extensive

#DidYouKnow Customers with a long-standing relationship with a bank may get better rates.

The best bank for unsecured personal loans is the one that provides what you need to manage your finances optimally.

Credit unions

These not-for-profit community financial institutions offer loans and benefits to their members. Once you become a member, you can apply for an unsecured or secured loan. Credit unions offer services similar to banks. What makes them different is that they can offer lower rates and more personalized services and attention.

#CaminoTip It's a good idea to compare multiple lenders to find the best lender for your personal and business needs.

Peer-to-peer lenders

Also referred to as P2P lending, this is an alternative where borrowers work with investors instead of banks. Peer-to-peer lending works great for debt consolidation and individuals who'd rather not borrow money from traditional lenders, like banks.

Top 12 Unsecured Personal Loans

If you're in the market for unsecured personal loans, here are the best lenders:

Camino Financial

Best for business investments

If you want to get a personal loan to invest in your business, we're a better alternative. As a business lender, Camino Financial leads the field in offering flexible terms and fixed rates. We help the people that other lenders turn down. Loan amount: $10,000 to $50,000 Loan terms range: 24 months Interest rates: 32% to 45% Min. credit score: 670 Other considerations:

• We use a soft pull that doesn't hurt your credit score
• Our fixed terms adapt to your needs
• The online application process is quick and easy
• We don't charge prepayment penalties

#DidYouKnow We provide personal customer service assistance in Spanish and English.

The online application takes less than 10 minutes, and the process is 100% secure. Get A Camino Financial Loan!

Upgrade

Loan amount: Upgrade approves loan amounts ranging from $1,000 to $50,000 Terms: 24 to 84 months Min. credit score: This lender offers online unsecured personal loans to applicants with a minimum credit score of 560. Rates:  5.94% to 35.97% depending on your credit score, credit usage history, and other factors Other considerations:

• The one-time origination fee ranges from 2.9% to 8%.
• The online lender does not charge a fee to repay a loan early.

Marcus

Loan amount: ranging from $3,500 to $40,000 Terms: The online lender offers competitive rates from 6.99% to 19.99% Min. credit score: You must have a minimum credit score of 660. Rates: The APR depends on your creditworthiness and the loan's length. Other considerations:

• The lender never charges sign-up, late, or prepayment fees.
• Loan terms range from 36 to 72 months, and Marcus offers an auto-pay discount of .25% so borrowers can pay down their loan quicker.

Upstart

Loan amount: applicants can apply for loan amounts ranging from $1,000 to $50,000 Terms: Upstart offers 36 and 60-month loan terms. Min. credit score: No minimum credit score is required Rates: APRs range from 5.31% - 35.99% Other considerations:

• Applicants can get next-day funding when applying with this online P2P lender.
• In addition, the lender doesn't charge a prepayment fee when paying off the loan early.

LendingClub

Loan amount: there are two loan terms: 36 and 60 months Terms: $1,000 to $40,000 Min. credit score: A minimum credit score of 600 is required Rates: their competitive rates range from 7.04% - 35.89%The lowest APR is for applicants with the best credit scores. Other considerations:

• The lender charges 3% to 6% in the origination fee.

Prosper

Loan amount: Prosper helps applicants borrow money in amounts up to $40,000 Terms: 3 or 5 years Min. credit score: Applicants must have a minimum credit score of 640 to qualify Rates: APRs from 7.95% to 35.99% Other considerations:

• The lender charges 1% to 5% in origination fees and a late fee of $15 or 5% of the missed payment amount.
• You must have a debt-to-income ratio of 50% and no bankruptcy filings in the last 12 months.
• In addition, applicants must have at least 3 open credit accounts.
• They usually transfer funds within 5 days.

Wells Fargo

Loan amount: You can apply for loans ranging from $3,000 to $100,000 Terms: from 12 to 84 months Min. credit score: 660 Rates: fixed rates beginning at 5.74% Other considerations:

• The bank has approximately 5,000 branches in the U.S. and offers online services.
• The bank doesn't charge origination, closing, or prepayment penalties.
• To apply for a personal loan, you must have an existing account with Wells Fargo.

Citi Bank

Loan amount: from $2,000 to $30,000 Terms: 12 to 60 months Min. credit score: 680 Rates: Citi Bank offers APRs from 7.99% to 23.99% Other considerations:

• You can get a fixed-rate personal loan at one of the 723 U.S. branches or apply online.
• Once your loan is approved, they mail checks in 5 days.
• Applicants must have had a Citi deposit account for at least 3 months and a minimum yearly income of $10,500.
• In addition, you can earn monthly ThankYou Points when you link your loan to an eligible checking account.

#CaminoTip You should always compare unsecured personal loan rates before you fill out a loan application.

SunTrust Bank

Loan amount: from $5,000 to $100,000 Terms: 24 to 144 months Min. credit score: 660 Rates: from 2.49% to 19.99% Other considerations:

• You can get unsecured personal loans at one of the 1,400 U.S. branches or use the bank's online service called LightStream.
• The bank doesn't charge fees, and same-day funding is available.
• SunTrust's advertised rates and terms are subject to change without notice. However, SunTrust promises to "beat any qualifying rate from another lender."

Connexus Credit Union

Loan amount: up to $25,000 Terms: choose term lengths from 24 to 84 months Min. credit score: not disclosed Rates: The member-owned, nationwide credit union offers rates starting at 5.99% with a maximum rate of 18% Other considerations:

• Applicants can apply online, by phone, or at any branch.
• You must provide personal information like date of birth and SSN. Also, prepare to share monthly income, expenses, and contact information.
• Connexus does not charge prepayment penalties.

Alliant Credit Union

Loan amount: from $1,000 to $50,000 Terms: Choose terms from 12 to 60 months Min. credit score: 640 Rates: You can apply for unsecured personal loans with rates starting at 6.24% Other considerations:

• Alliant offers the best rate based on the payment method, creditworthiness, and ability to repay the loan.
• In most cases, approval and funding occur on the same day.

PenFed Credit Union

Loan amount: Choose a desired loan amount from $600 to $50,000 Terms: up to 60 months Min. credit score: 580 Rates: APRs beginning at 5.99% Other considerations:

• You aren't required to be in the military to join PenFed.
• Co-applicants can apply, and PenFed doesn't charge origination, prepayment, or hidden fees.
• Once your loan is approved, you can receive the funds by direct deposit within 1-2 business days and a check in 5 days.
• When you open a checking account with PenFed, they require a minimum daily balance of $500 for an Access American account.

Camino Financial Is Your Best Option!

What to Consider when Choosing an Unsecured Personal Loan

Getting a loan is a straightforward process when you understand specific financial terms that affect your decision. We want to help you find the unsecured lending alternative that best fits your needs. That's why we're sharing the meaning of the most important terms. Annual percentage rates (APRs): Depending on the lender, the APR includes the interest rate, origination, loan processing, and other fees. Lenders charge rates based on the amount of risk they incur. Origination, late, and prepayment fees: Not all lenders charge these fees, but some do. They factor in amounts to cover costs associated with the loan at the beginning, middle, and end of the loan term.

• Origination fees usually are a percentage of the loan amount. It's what the lender charges for processing your loan.
• Late fees are flat amounts or percentages charged for a monthly amount overdue. (Late fees are not the only problem with late payments, they could affect your credit score too!)
• When lenders charge a prepayment penalty, they impose a percentage penalty against the outstanding balance or a fixed amount.

#DidYouKnow Camino Financial doesn't charge a prepayment penalty.

Interest rates: When searching for the perfect loan, you'll probably find these 2 types of rates:

• Variable interest rates fluctuate based on market changes during the life of a loan, whereas fixed interest rates do not change.
• Fixed-rate loans are easier to budget because the payment amount doesn't change.

Term: What is better, a shorter or a longer-term?

• A shorter-term means you pay less interest, but your monthly payment is higher.
• Conversely, a longer-term brings down the payment amount and increases the total interest you pay during the term length.

Other considerations

• Use of proceeds. One of the highlights of gaining access to immediate unsecured funds is being able to spend the money for just about anything. Our Solopreneur loan offers flexible use of proceeds.
• Contracts and fine print. You don't want to receive the loan contract and not know what you are signing because it has a fine print. Camino Financial is always honest and has no fine print and no hidden fees.
• Honesty. Truthful lenders will always have a transparent process. You should be able to ask any question that comes to mind before you sign on the dotted line. Honesty is what we're all about at Camino Financial; we can help you if you have any questions.
• Funding time. Banks may take a week or more to approve a personal loan. However, fintech lenders can get money to you in 1-3 days.

How to Apply for an Unsecured Personal Loan

Use these step-by-step instructions when you're ready to apply for a personal loan.

1. Stay informed about your credit

Contact the three major credit bureaus for a free credit report. You can get one each year. When you review and compare the reports, make sure there aren't inaccurate entries. If so, correct or remove them before applying for a loan. You can also use Credit Karma to get a free credit report.

2. Narrow down your lender choices

Narrow down your lender choices. Then, compare their lending requirements. This will allow you to determine whether the lender will approve your loan application. Choose a lender that meets your financial needs and is an established lender in the industry.

#CaminoTip You can search for reviews of each lender on sites like Trustpilot.

3. Know how much money you need and what you can afford.

This point is crucial. You need to know exactly how much you need and how much you can pay. If you apply for a lower amount, you'll come up short and might need to ask for another loan. If you ask for more, you might have difficulties making your monthly payments.

#CaminoTip Include closing costs in your estimation to come up with a figure that meets your budget.

4. Gather documents beforehand

So you're ready to fill out the application, make sure you know the documents you'll need and how to complete a personal loan application. Most lenders will require copies of

• bank statements
• driver's license or passport
• latest pay stub
• earnings statements such as W-2s and 1099s
• tax returns

In addition, to verify your address, they may ask for a copy of your utility payment invoice. Fortunately, Camino Financial's application process is entirely paperless. And if you get approved, we'll only ask for a few documents that you can share with us online.

5. Get a hold of the application

If your preferred lender has an online application, pull up their website. Traditional banks and other institutions usually have both paper and online applications. As you complete the online application, a chat or contact window may pop up for any questions along the way.

6. Fill in every line and section of the form

The application may need your SSN, name, address, date of birth, and other personal information. In addition, prepare to provide information relating to your income and outstanding bills or loans you owe. In addition, there will be a section on how much money you want to borrow, your preferred loan terms, and how you intend to use the proceeds.

7. Make sure the application is secure

Reputable lenders have a built-in software system that encrypts private information, such as your bank information. If you don't feel like you can safely submit sensitive information, then don't. At Camino Financial, we use the same technology that banks use to keep your information private and secure.

8. Wait for a loan decision

Once you submit the loan application, you should receive a loan decision. How long it takes you to receive it will depend on the lender. If you're approved, you'll receive information immediately on what to do or expect next. Most of the time, if you apply with Camino Financial, you'll know if you prequalify almost instantly. To continue the lending process, you might have to submit extra documents or share your bank statements. At Camino Financial, you can complete the whole process online. You just share your closing documents online and your bank statements through Plaid, a secure tool that will allow us to review your cash flow.

9. Receive and sign the contract

Once the loan is approved, the lender will provide a loan contract that you should carefully read before signing. Again, you may receive a paper contract when dealing with a bank or credit union and an electronic loan contract from online lenders. Don't sign the loan agreement until you're confident you can repay the money. You must be comfortable with all the terms before moving forward.

10. Receive the funds

Once you sign the loan documents, traditional and online lenders transfer the loan proceeds directly to your checking account. In addition, some lenders offer fast loans that you can receive in as little as 2 days. After that, make sure you understand when your first payment is due and the specific payment arrangements. Since most people pay their bills online, lenders receive monthly payments online.

#CaminoTip You should always make your monthly payments on time. By doing so, you can avoid late fees.

How to Get an Unsecured Personal Loan with Bad Credit

Having a bad credit score doesn't mean you can't get a loan now. It only means you need to find lenders that offer loans to borrowers with lower credit scores. Unsecured personal loans for bad credit exist. To get one, be willing to start small and apply for less money than you want. Expect to pay a higher interest rate for a lower loan amount. For example, a lender could approve a $1,000 loan that you repay in 12 months. Use the money to consolidate debt or pay off a bill with a long-outstanding balance. Another smart idea is to shop for the best lender. Compare APRs and fees lenders charge. Lender requirements vary widely as to their terms and loan amounts.

Common Uses for Unsecured Personal Loans

Personal loans have a distinct advantage: you can use the money for almost anything. People use the money to:

• start a business
• debt consolidation
• invest in your personal growth
• pay for medical expenses
• finance a wedding
• pay off a child's college education balance
• you could pay a contractor to remodel or update your house
• take a well-deserved vacation to a favorite destination
• buy a food truck to start a catering business
• if your vehicle needs replacing, you could shop for a newer car or pay a mechanic to fix the one you currently drive

There are very few limits to how you can spend personal loan money.

Unsecured Personal Loan Alternatives

If you aren't ready to get a personal loan, analyze these other ways to get cash fast.

0% APR Credit Card

Credit card companies offer introductory 0% APR credit cards to get more customers.

Card issuers vary on what falls under the 0% APR umbrella and the specified period for the no-interest card.

For example, one company may not charge interest on new purchases and balance transfers, while another offers the rate on cash advances only.

If a transaction doesn't fall under the 0% APR, then you'll pay the company's fixed or variable rate.

Home Equity Line of Credit (HELOC)

As you need money, you can borrow up to 85% of your home's equity.

Most homeowners use a HELOC on an as-needed basis. Monthly payments depend on how much credit you've used.

Examples of how to use the money are to pay for medical bills, college expenses, home improvements, or to purchase a vehicle.

Keep in mind, your home is used as collateral to secure the loan. Therefore, if you can't repay the debt and still make a mortgage payment, you could risk foreclosing on your home.

A personal line of credit

Personal lines of credit (PLOCs), or revolving lines of credit, are another good option.

Once the lender approves you for a personal line of credit, you can make withdrawals during the draw period. Then, as you keep paying off the PLOC, the original amount is available again.

Some lenders charge monthly maintenance fees and charge higher interest rates since the line limit is unsecured.

Most lenders require a credit score of 700 and above to qualify for an unsecured personal line of credit.

401 (k)

You can withdraw cash from your retirement account based on IRS annual guidelines. You can take an early withdrawal before age 59 ½ but are subject to a penalty tax and income taxes.

A 401 (K) loan is a better option because you don't pay taxes and can repay the loan in five years.

Before withdrawing cash, you should talk to a financial advisor, as a 401 (k) has restrictions and limitations.

Payroll advance

If you can budget repaying your employer for an advance, talk with your boss. You may be able to spread out the payroll repayment deduction into 4 weeks or more without paying interest.

Payday loan

Payday loans are another type of financing alternative that doesn't require collateral.

However, they ask for a postdated check or automatically withdraw payments to ensure they'll get paid. Plus, they tend to charge very high-interest rates and have expensive fees. Some even consider these types of loans predatory.

Family and friends

Some people may be able to depend on family and friends to finance their needs.

Getting cash this way should be a temporary solution, though.

Because this isn't usually a legally binding loan, there's no record of your payments compared to making monthly loan payments that a lender reports to the credit bureaus.

You also run the risk of harming personal relationships when you can't repay the loan on time.

The truth is that, most often than not, getting one of the best personal loans is a better option when compared with all these alternatives.

Get the Money you Need

Online unsecured personal loans provide access to cash quickly and can be the answer to financial woes. Now that you know how this type of loan works, you can move forward without hesitation.

One of the best loan funding options available is Camino Financial.

We work with applicants that other lenders turn down. Quite frankly, we don't want to see anyone give up on their dreams because they couldn't get financing. We encourage you to apply for an unsecured personal loan and become one of our valued members. You'll discover that Camino Financial is uniquely different from other lenders in the loan marketplace. Get Approved For A Loan Today