Personal Loans — Unsecured Personal Loans (1)
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.