Unsecured Loans With No Collateral: Compare and Apply

» MORE: Learn the pros and cons of unsecured loans

Common uses for unsecured personal loans

Personal loans are most beneficial when they help you achieve a financial goal. But there are times when you should consider other options as well.

Most financial experts advise against borrowing for discretionary purposes, like weddings or vacations, for which there can be less expensive options. At the same time, some people prefer the fixed payments and terms associated with personal loans.

» MORE: Ways to use a personal loan

Here are NerdWallet’s recommendations, based on what you plan to use the loan for.

Debt consolidation

Why choose an unsecured loan: The process of debt consolidation involves combining debt from multiple sources into a single monthly payment, ideally at a lower interest rate. Using a personal loan to consolidate means one payment over a fixed period, giving you an end date to work toward.

Home improvements

Why choose an unsecured loan: A home improvement loan is a good idea if you don’t have a lot of equity in your home or want to avoid using your home to secure the loan. Unsecured home improvement loans typically have higher, fixed interest rates but shorter repayment terms than home equity loans and lines of credit.

Wedding

Why choose an unsecured loan: A personal loan for a wedding is a good option if you’re going to borrow anyway and can get a lower rate than you would on a credit card. Because you borrow a set amount, you’ll also avoid the temptation of overspending.

Boat

Why choose an unsecured loan: Some unsecured loans come with the benefits of online pre-qualification and fast funding. They also don’t require a down payment.

Medical expenses

Why choose an unsecured loan: Whether you’re looking to finance a dental, medical or cosmetic procedure, a personal loan can help with expenses not covered by insurance or savings. It can be an expensive way to finance health-related expenses, so be sure to compare it with other options.

» MORE: How to pay your medical bills

How to compare unsecured loans

Here are some features of unsecured loans you can compare across lenders.

Annual percentage rate. The APR represents the entire cost of the loan, including the interest rate and any fees the lender tacks onto the loan. Reputable lenders offer APRs between 6% and 36% and should let you know APR ranges upfront.

Time to fund. Some lenders can fund a loan the same business day you apply for it, while others fund it by the next business day. You can help move the application process along by being prepared with the appropriate documentation and responding promptly to lender questions.

Fixed or variable rate. Many unsecured loans have fixed rates, meaning the interest rate you’re approved for is the one you’ll pay for the entire loan term. Some lenders offer a variable-rate option, which is subject to change over the life of the loan.

Loan features. Some lenders offer perks like free access to your credit scores, financial education resources or networking opportunities.

How to qualify for a personal loan

Lenders may have different requirements for borrowers, and they all weigh those requirements differently, but there are some general factors that help you qualify for low rates.

Good credit. Good- and excellent-credit borrowers typically get the lowest APR on a personal loan. Some lenders cater to fair- and poor-credit borrowers, but the best terms and rates are reserved for those with a FICO score of 690 or higher.

» MORE: Not sure if you qualify for a loan? See what credit score you need to get one

Low debt-to-income ratio. Many lenders check if your debt-to-income ratio is low enough to support monthly repayments. Some say borrowers need a 40% DTI or lower to qualify, but others have higher limits.

Steady income. Having a steady income can signal to a lender that you'll have the funds available to repay your loan.

Pre-qualifying for a personal loan with an online lender lets you see potential loan terms, including the loan’s interest rate, loan amount and payments. Take the steps to pre-qualify and compare offers to find the loan that gives you an amount you need and a payment you can afford.

» MORE: Pre-qualify with multiple lenders on NerdWallet

Applying for an unsecured loan

Once you've pre-qualified, the application process can vary by lender. Online lenders, bank lenders and credit unions have different application processes.

Online applications: If you're applying for a loan online, you can typically complete the entire process without having to make a phone call. In some cases, your loan can be funded the same or next business day.

Bank applications: Some banks have online applications, but many require an in-person visit to complete the process. Banks may also require you have an existing account before you apply.

Credit union applications: You usually need to be a member of a credit union to borrow money from it. Membership is often tied to where you live or work, or organizations you're involved with, but some credit unions allow anyone to be a member.

Here's what you usually need for an unsecured loan application:

• Phone number.

• Social Security number.

• Employer information.

• Education history.

• Financial information, like retirement assets, home equity and bank account information.

» MORE: Apply for a loan in three steps

Unsecured loan alternatives

You may want to consider alternatives along with a personal loan. There are a variety of personal loan alternatives, depending on what you're financing.

0% APR credit card: These cards work well if you need to finance a wedding, repay medical bills or consolidate debt. You need good or excellent credit to qualify and debt small enough to be repaid in the card's 12- to 18-month, interest-free period.

Credit unions: Credit unions tend to offer lower interest rates to members with fair or poor credit (a score under 690) than banks or online lenders do. Federal credit unions cap their APRs at 18%.

Home equity loans and HELOCs: These are good options for home renovations if you're comfortable using your home as collateral and have enough equity to qualify.

A home equity loan can give you a longer repayment term and typically a lower rate than a personal loan. A home equity line of credit lets you use funds as needed, and you only pay interest on what you use.