How to find low unsecured loan rates

People need loans for all kinds of expenses: some dream about having their own home, some want to finance a personal project and others are just caught off-guard by unexpected events. Each reason is justified, but the type of loan must be chosen according to the circumstance. For example, secured loans provide more money than unsecured loans, but they require guarantees.

For a bank, the ideal customer should be able to provide collateral and have a good credit rating. If you find among those people that say I need a loan but I have bad credit you should not lose your hope. Despite your credit score, collateral will always encourage any lender to get in business with you. But what happens to those that are unable to provide guarantees? This segment of customers is targeted by another type of financial products, called unsecured loans. The lack of collateral imposes new rules for applicants, stricter terms and fixed conditions. Unsecured loans can provide only small to medium amounts ($1000-$25000 loans), while repayment periods vary between 1 and 15 years.

Unsecured loan application

Anyone can apply for an unsecured loan, regardless of their credit, but lenders reserve the right to choose who they give money to. Unsecured loan applications are carefully analyzed before any response. As there is no guarantee other than the applicant ‘s promise, the bank must evaluate the candidate based on his payment history and financial capability.

Unsecured loan rates

We were saying before that unsecured loans are highly influenced by your past borrowing performances. If you’ve done well, making timely payments and respecting the terms you’ve agreed to, that makes you a good borrower. You qualify for better unsecured loan rates. Keep in mind though, these will never be able to compete with secured loan rates, due to different levels of risk.

You must understand that unsecured loan rates can be different for every individual, based on each application’s score. Here is a short list of factors involved in evaluation:

  • Past repayments history
  • Income
  • Savings
  • Job stability
  • Age

Depending on each bank’s policy, there can be more or less such factors.
Many have noticed all kinds of ads where different lenders advertise their offer and somewhere bellow, in small letters is written something like : “APR starting from “. That is their best offer, but that will be available only for individuals who match their exact conditions. For others, rates will vary upwards. Let’s see what can determine unsecured loan rates to go up:

  • The amount borrowed; for smaller amounts, the interest rates tend to be higher;
  • Credit history: every late payment, default or other loan repayment problems weigh in your offering rates; when applying for an unsecured loan be sure to check your credit history for errors, thus avoiding to pay for someone else’s mistake;
  • Applications: every application you make remains on record for 12 months; a large number of applications arises attention;
  • Too many accounts (except savings, off-course) suggest financial insecurity; it is best to close those that aren’t necessary and maintain a good balance for those left open;

Even though getting an unsecured loan with damaged credit can be very difficult, it’s not impossible. There are lenders willing to get in business with such customers. Obvious, unsecured loan rates for bad credit will be even higher.


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