Best unsecured loans of July 2024

Unsecured loans don't require property as collateral, such as your home or vehicle, that can be taken if you stop making payments. Since they're riskier to the lender, they often come with higher interest rates but offer other benefits. Unsecured personal loans are one of the most common types of unsecured loans. In fact, Americans collectively held nearly 29 million unsecured personal loans in 2023, according to Experian.

Here's how to find the best unsecured personal loans, what to know about these and other unsecured loans, and which alternatives to consider if you can't qualify.

Compare personal loan rates

Best unsecured loans

Many banks, credit unions, and online lenders offer unsecured personal loans. While a low rate can save you the most money on a personal loan, it's also important to consider credit score and income requirements, which vary between lenders. Compare lender requirements below and prequalify before you apply to see which lenders are likely to approve your loan and what rate you're likely to get.

SoFi: Best overall

Upgrade: Best for fair credit

Discover: Best for no origination fees (and low rates)

Splash: Best quick loans for good credit

Universal Credit: Best debt consolidation loans for bad credit

LightStream: Best home improvement loans and low rates

Best Egg: Best for high close rates if pre-approved

BHG Financial: Best for large personal loans

OneMain Financial: Best bad credit personal loans

Upstart: Best fast personal loans for all credit types

LendingClub: Best online experience

Methodology

We evaluated the best unsecured loans based on factors such as customer experience, minimum fixed rate, maximum loan amount, funding time, loan terms, fees, discounts, minimum credit and income requirements, and whether cosigners are accepted. Our team of experts gathered information from each lender's website, customer service department, directly from our partners, and via email support.

Each data point was verified by a third party to make sure it was accurate and up to date. Read our full lender rating methodology for more information.

What is an unsecured loan?

An unsecured loan is any loan that doesn't require collateral. By contrast, secured loans require collateral, which is an asset you agree to surrender to the lender if you default on the loan. For example, an auto loan is typically secured by the car purchased with the funds. If you miss a certain number of payments on your auto loan, the lender can seize your car. Once you have repaid a secured loan, the lender no longer has a right to your property.

Unsecured loans offer less recourse to the lender if you stop making payments, so lenders are typically more stringent in approving applicants for unsecured loans. They may require a higher credit score or a lower debt-to-income ratio (DTI). They may also charge a higher interest rate to compensate for the risk. However, because there's no collateral to appraise, they tend to close much faster than secured loans. For instance, unsecured personal loans often fund within days and can even fund the same day you apply.

If you fail to make payments on an unsecured loan, the lender can report your delinquency to the major credit bureaus, which will cause your credit score to drop. They can also attempt to collect your overdue balance or file a lawsuit against you. But they can't take your personal property.

Types of unsecured loans

• Personal loans: A personal loan is a type of unsecured loan provided to the borrower as a lump sum upfront and repaid in fixed installments with interest. Loan terms typically range from 2 to 7 years, and many lenders offer loans up to $50,000. The average interest rate on a two-year personal loan was 12.49%, according to the Federal Reserve.
• Personal lines of credit: A personal line of credit is an unsecured, revolving credit line that you can borrow against repeatedly without needing to reapply. The minimum payment may vary each month, and your available credit replenishes as you make payments.
• Student loans: Student loans, whether issued by the U.S. Department of Education or by a private lender, are unsecured loans used to pay for postsecondary education. You typically repay a student loan in installments after a grace period following graduation. Federal student loans come with low, fixed interest rates, while private student loans may have higher variable rates.
• Credit cards: Credit cards offer a revolving credit line connected to a card you can use to make purchases. If you pay your credit card in full during the grace period, your account won't accrue interest. If you carry a balance, interest is typically calculated daily. Credit cards have higher average annual percentage rates (APRs) than other unsecured loans - 21.59% on average, according to the Fed.
• Unsecured business loans: An unsecured business loan, such as a business term loan or business line of credit, is a loan offered to a business based on its revenue and business history. Unlike equipment loans and commercial real estate loans, an unsecured business loan does not require collateral.

Pros and cons of unsecured loans

How does an unsecured loan work?

When you apply for an unsecured personal loan, the lender will review your credit report, income, and debts to determine how likely you are to repay the loan. If you're approved, the lender will assign an interest rate to your loan offer based on your risk, and may charge an origination fee as well - if you have excellent credit and a high income, you're more likely to get the best advertised rate.

Most lenders advertise an APR, which includes the interest rate and any upfront fees, like origination fees, and is useful for comparing lenders. Not all lenders charge an origination fee, and you're less likely to be charged one if you have good credit. Origination fees can range up to 12% of the loan amount, depending on your credit, and are deducted upfront from the loan amount.

Average interest rates by credit score and loan term

Note that the longer the loan term, often the higher the interest rate. And rates can vary widely depending on your credit score.

Once you accept a personal loan offer, the lender will transfer the funds as a lump sum into your bank account. You'll then repay the loan in monthly installments, usually over the course of two to seven years. Unsecured personal loans typically come with fixed interest rates, so your monthly payment will stay the same over the entire term. Most lenders don't charge prepayment penalties, so you can typically repay your loan in full at any time to save money on interest.

Other types of unsecured loans, like student loans and credit cards, work differently.

How to compare unsecured loans

When choosing an unsecured personal loan lender, consider the following:

• Do I meet the eligibility requirements? Consider whether you meet the lender's qualification requirements, including the minimum income and credit score.
• Does the lender allow cosigners? If you have difficulty qualifying for an unsecured loan based on your credit score, you can ask a family member or friend with good credit to cosign the loan or apply jointly with you, which may increase your approval odds. Not all lenders allow cosigners.
• Can I afford the monthly payment? Prequalify to get an APR and monthly payment estimate from multiple lenders for comparison.
• What will the loan cost me over time? Calculate the total you'll pay in interest and fees over time for the loan.
• Does the lender offer discounts? Some lenders offer autopay discounts, or direct pay discounts for debt consolidation. If costs are otherwise about equal, you may want to choose the lender that offers the best discounts.
• How long does it take to fund? If you need money for an emergency, choose lenders that can fund your loan as soon as the same day or next business day after you apply.
• Are there any perks to working with this lender? Some lenders offer extra benefits, like a convenient mobile app or financial resources. Consider which perks are important to you.
• What is the lender's reputation? Look for patterns of customer complaints or praise on third-party review websites like Trustpilot to ensure you choose a lender likely to provide a good customer experience.

How to get an unsecured loan

1. Check your credit: You can access your free credit report at AnnualCreditReport.com, and dispute any errors that may be dragging down your score. If you don't already have access to your credit score through a bank or credit card account, you can check it at the credit bureaus directly.
2. Research lenders: Using the factors above, narrow down your options to the lenders that best meet your needs.
3. Prequalify: Most lenders offer a prequalification process that provides you with a customized rate estimate based on a soft credit pull. Prequalifying can help you compare your options without damaging your credit score.
4. Select a loan offer: Once you've prequalified with a few different lenders, choose the loan offer that best meets your needs, paying attention to the monthly payment as well as the total cost over the term.
5. Formally apply: Upload any additional documents the lender requests, like paystubs, tax returns, photo identification, or utility bills.
6. Sign your loan documents: If approved, review your loan agreement carefully. Note that your final rate may vary from your preapproved rate, and make sure the loan still works for you before you sign the documents.

Alternatives

Secured loans

It's a good idea to consider a secured loan when you are using the funds to buy certain assets, when you need a large loan, or when you want to get a lower rate or a longer repayment term. Some examples of secured loans include:

• Home equity loan or HELOC: A lump sum loan or revolving line of credit secured by the equity you've built in your home, which may feature longer repayment terms, higher borrowing limits, and lower rates than an unsecured loan
• Auto loan: A loan used to purchase a vehicle that is also secured by that vehicle
• Secured personal loan: A loan secured by your home fixtures, your vehicle, a savings or investment account, or another asset
• Life insurance policy loan: A loan secured by the cash value of a permanent life insurance policy

Cash advance apps

Cash advance providers are financial technology companies that provide an advance, rather than a loan, on your earned income ahead of payday. You can typically only get up to a few hundred dollars at a time and repayment is due by your next paycheck. But there's no credit check required, and some apps make money via optional tipping rather than required fees.

401(k) loan

If your plan sponsor allows, you can borrow from your retirement account - up to 50% of your vested account balance or $50,000, whichever is less. (If 50% of your vested balance is less than $10,000, you may be able to borrow up to $10,000.)

You'll need to repay a 401(k) loan with interest to avoid a tax penalty, but that interest goes into your retirement fund. Be careful with this type of loan if you plan to leave your job within five years, since you could be required to repay the full amount at once.

Home equity investment

A home equity investment is not a loan, but rather an agreement to provide a company with a share of your future home equity or appreciation in exchange for a lump sum of cash now. These arrangements can be costly when it comes time to repay, but they don't typically require a credit check or monthly payments. You need to be a homeowner with a certain amount of existing home equity to qualify.

FAQ

Can you get an unsecured loan with bad credit?

While many personal loan lenders require you to have good credit, it's possible to get approved for an unsecured loan with poor credit. You can start by applying to the best bad credit lenders or lenders that allow cosigners. If you're still struggling, consider unsecured installment loans with no hard credit check, which typically come with higher interest rates and are only available in some states, or an unsecured payday alternative loan from a credit union.

How can you use a personal loan?

You can use a personal loan to cover almost any cost, including credit card debt consolidation, emergency expenses, or home improvement projects. Most lenders prohibit you from using a personal loan for illegal activity, and some also restrict the use of personal loan funds for business expenses, college tuition, real estate, and investments. You should always check the lender's rules before applying for a personal loan.