Choosing the Right Unsecured Loan

Unsecured Loans Explained

When you get an unsecured loan, you don’t have to use any of your cash or assets as collateral to back the loan. They’re often called signature loans because you just use your signature to guarantee that you’ll pay back what you borrowed. The trade-off is that you may end up paying higher interest rates. But the better your credit score is, the lower interest rate you’ll receive.

Here’s what to expect during the loan application process:

• Credit check
• Employment verification
• Income verification (through bank statements or tax returns)
• Bank information (for direct deposit)
• Loan agreement (sign and return)

Comparing Loan Options

There are a few things you want to look out for when getting an unsecured loan. The most obvious factor is the interest rate, since that affects how much you’ll pay each month. You also want to look at what the monthly payment looks like as well. Even if a loan comes with a lower rate, the monthly payments could put a strain on your budget if the loan term is shorter. Find a balance to make sure you can comfortably afford your payments.

Also check for fees, such as origination fees or financing fees. Find out if they’ll be rolled into the loan amount or if you have to pay them outright.

Frequently Asked Questions

by Lauren Ward

Personal Finance Writer

Lauren Ward is a personal finance writer with nearly ten years of experience covering topics like loans, credit, and real estate. She lives in Virginia with her husband and three children.