Applying for a personal loan online can be a fast and easy process. Your online application may even be approved in less than 24 hours! If you are, then the funds will likely be available in a few days.
You should also be aware that there are some fraudsters out there who prey on people that need money quickly. Be sure to apply through a safe and secure website, like this one.
Write down the lending company's name (one of Credit.com's trusted business partners), and you will apply directly with them.
Here are some additional ways to protect yourself:
- Know where your credit stands. For instance, read our blog post on why you should check your credit before applying for a personal loan.
- Be aware that fraudsters typically pose as legitimate companies, claiming to be lenders. Make sure you are dealing with the right person. In particular:
- When you receive a confirmation email from your loan provider, make sure it comes from the trusted domain of that company, and not from a generic email address (Gmail, Hotmail, Yahoo! etc.)
- Look for a padlock in the browser bar on any page where you are asked to provide personal information. This means your information will be sent securely to the lender.
- Never override your browser's warning if it says a site's security certificate has expired or the site you are about to visit is not secure.
Be aware that fraudsters will try to get you to send them money before you get the loan. Be very careful with upfront fees. Do not send a company money to cover "credit insurance" or the first payment of the loan.
STOP if you are told to send funds via a prepaid card, gift card or a money transfer (such as Western Union or MoneyGram). Legitimate lenders do not operate that way.
You should also be aware of the application process involved in an unsecured personal loan as well as how it will affect your credit, the application process, and any prepayment penalties or late fees that may exist. You will also want to find the lowest rates available.
What is an Unsecured Personal Loan?
When you receive an unsecured personal loan, the loan is only supported by the overall creditworthiness of the borrower. This means that there is no collateral required to secure the amount of the loan. To obtain an unsecured personal loan, you will likely need to possess high credit ratings for approval. A few examples of unsecured personal loans include credit cards and some personal and business loans.
Since there is collateral as insurance that the loan will be paid, the interest rates on unsecured loans are typically much higher than those you find attached to secure loans such as the mortgage of a home in which the house is collateral or even an auto loan in which the vehicle is the collateral.
Steps to Acquiring an Unsecured Loan
If you have decided that the best route for you financially is getting an unsecured loan, then there are several steps you should follow during the process.
Step One: Always educate yourself on the basics of unsecured personal loans and find out the amount range you will be able to borrow.
Step Two: Get your free credit report and scores and see what your current credit rating is. If it is lower then you will most likely be denied and will have to try for a loan that is secured with collateral.
Step Three: If you still want to get the unsecured loan, but your credit rating is less than ideal, then now is the time to pull all of your credit reports from each of the three major credit reporting bureaus and see what you can do to increase your score and improve your creditworthiness.
Step Four: Before getting an unsecured personal loan, it is recommended that you pay down any existing debt you may have and make sure that you continue to pay your bills on time.
Step Five: Next, you will apply for the loan through a major bank or other financial institution. If you already have an institution in which you bank, then you should go there first because you have already established a relationship with them.
Step Six: if you have a lower credit score, you can always apply through an online lender, but make sure to read over the tips above, so you are not met with a scam or fraudulent loan process. Also, keep in mind the interest rate on an unsecured loan you obtain online might be much, much higher.
Step Seven: Protect your identity and yourself. Only meet with reputable institutions that have no sordid history of lawsuits or fraudulent activity. Never pay any money in advance for a loan you apply for either.
Step Eight: Don’t be afraid to look around for the best interest rates. You do not have to settle on the first offer. Don’t worry about affecting your credit by doing this either. It will be known that you are shopping around for the best rates for the single loan application, so your credit score will not be impacted by several different hard inquiries.
If you have a higher credit rating, then you can qualify for the lowest rates available.
Step Nine: When you are satisfied with the terms and interest rate and are comfortable with the lender, you can then submit your application along with proof of your identity. This is needed to make sure that you are who you say you are and so they can pull your credit history. You will also need to verify both your current address as well as verification of your annual income.
Step Ten: Once all the paperwork is in place and all the verifications that are needed have been submitted, you will verify the amount you wish to borrow, set up security questions, gain a clear understanding of what debt-to-income ratio means, and then focus on the terms of repayment. Make sure you are aware of all loan repayment options as well as the conditions and rules that may be in the fine print. Also, be sure that you will be able to afford the monthly payments.
While it seems like a lot to take in and a lot that you need to do, an unsecured personal loan may be a good option for you if you have a high credit rating and don’t want to provide any kind of collateral to secure the loan.
As always, make sure you pay on time, so you can avoid any late fees or negative remarks on your credit file. It is also good to understand what the prepayment penalties are if you choose to pay the balance off before the maturity date of the loan.
How Long is the Approval Process?
Once you have been approved for the loan and all your verification paperwork has been submitted and accepted, it is usually a quick turnaround. The approval process typically lasts for up to 72 hours so that all the verifications can be gathered and checked. Then the funds may be dispersed anytime over the following five business days.
However, an online unsecured personal loan may be much faster with approval lasting a couple of hours and the consumer receiving the funds within two business days.
Bad Credit Loans
If you have poor credit, then a bad credit loan may be your only option. Before obtaining a bad credit loan with an insanely high-interest rate, you should explore some of your other options:
- Work on ways to build credit so you can get approval for an unsecured personal loan with a lower APR (annual percentage rate). The higher your credit score, the lower the APR will most likely be.
- Debt consolidation may be another option if you find that your credit scores are low but you have debt you need to pay off. With debt consolidation, you are trying to get a loan with a high-interest rate, but instead of paying several different interest rates, you are consolidating and paying one. This may make it easier to pay down the principal balance.
- Speak to a financial advisor about the state of your credit and financial goals and standing. They can better advise you on the best course of action for your individual needs. They can also help with the application process if you choose to get a personal loan and will be able to show you the personal loans calculator, so you have a clear idea of what a personal loan, the APR, and payments may do to your future financial health.
The bottom line for an unsecured personal loan is if you have excellent credit and don’t want a loan that requires collateral, then this is the ideal solution for you.