Best unsecured loans of May 2024

Looking for an unsecured loan? Don't settle for the first offer you see. Take a look at multiple lenders in order to compare your options. We did and analyzed a wide range of factors, including interest rates, credit score requirements, funding times, loan terms, loan fees, and more. The results reveal our top picks for the best unsecured loans to help you make an informed decision.

Compare the best unsecured loan rates of May 2024

Best unsecured loans

An unsecured loan is simply one that doesn't have any collateral attached to it (like your car or home), making them some of the quickest loans to get if you qualify. In fact, some personal loans can be funded as soon as the same day you apply. To get the best rates, you'll need excellent credit. But even with fair or bad credit, you still could get approved — though a secured personal loan might lower your rate or make approval easier.

SoFi: Best overall

PenFed: Best credit union for personal loans

Upgrade: Best for Fair Credit

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

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 Money: 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 personal loan lenders for 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.

What is an unsecured loan?

An unsecured loan does not require any collateral when borrowing money from a financial institution. The borrower will repay the principal and interest without any assets attached to the loan. Usually, you'll need a good credit score in order to qualify. However, you may also have to pay a higher interest rate in order to qualify for an unsecured loan, even with an above-average credit score.

A secured loan, on the other hand, requires some type of collateral in order for the borrower to qualify, such as a boat, car, or home. If the borrower falls behind on secured loan payments, the lender can take that property to recoup its losses. Secured loans may take longer to approve since the collateral's value needs to be confirmed.

How to compare unsecured personal loans

It's smart to consider multiple unsecured personal loans in order to compare options before choosing one. That way you can feel confident that you're getting the best rates and terms.

Follow these steps in order to properly weigh your personal loan options:

• Prequalification: Check that you can prequalify for a loan offer without undergoing a hard credit pull. This preserves your credit score while allowing you to assess multiple lenders. Just note that prequalification is not an offer of credit, and once you formally apply for a loan, the lender will conduct a hard credit pull which could temporarily ding your score.
• Annual percentage rate (APR): Your APR indicates how much you'll pay for a loan over time. A higher rate means higher monthly payments. Unlike the interest rate alone, the APR also accounts for any upfront fees, like an origination fee.
• Fees: Find out what fees each lender charges. An origination or application fee may be charged as a percentage of the loan amount and deducted from the loan proceeds, which can impact the amount of cash you actually receive. Also check for other fees, like late fees and prepayment penalties.
• Funding time: Each lender has its own timeline for depositing funds into your bank account. Some lenders can send funds as soon as the same day you're approved, while others could take a week or more. This detail is especially important if you need an emergency loan.
• Lender reputation: Read online third-party reviews to get a sense of credibility from real-life borrowers. Also check the Better Business Bureau to see if customers have filed any formal complaints.

Eligibility requirements for unsecured personal loans

Each lender has its own specific standards for approving loan applicants. Here are three items you can expect to be reviewed when you apply.

• Credit score: Lenders look at your credit score to evaluate your track record of paying bills on time. The higher you score, the better chance of approval you have. Generally, most lenders prefer a FICO score of 670 or higher but there are some lenders that consider fair and bad credit, but you will most likely have a higher interest rate as a result.
• Income verification: Lenders verify your income to make sure you have consistent funds to repay the loan each month. Expect to submit some kind of proof, such as pay stubs or bank statements.
• Debt-to-income ratio: Your debt-to-income ratio (or DTI) compares your monthly debt payments to your monthly income. Lenders calculate your existing DTI to determine how much additional debt you could comfortably take on with a new personal loan. Most lenders prefer a DTI of no more than 35%.

Check out: How to pay off debt fast

How to get an unsecured personal loan

There are a few steps to take once you're ready to find the best unsecured loan for you. Here's how to apply from start to finish.

1. Check your credit: Knowing your credit score can give you a sense of the kind of interest rates to expect. You can also use it to rule out lenders who require a credit score higher than yours. Take the opportunity to make sure there are no errors in your report as well.
2. Prequalify: Prequalification is a way to get a rate estimate without having the lender conduct a hard credit pull. Based on information you provide, the lender gives you an idea of the loan size and APR you may qualify for — all without hurting your credit.
3. Compare lenders and loan terms: Once you prequalify, compare lenders and choose one to apply with based on APR, the amount you can borrow, the monthly payment amount, and repayment term.
4. Apply for a loan: The personal loan application is more detailed than the prequalification stage. A hard credit check will be conducted and you'll need to submit financial documents. This may include recent pay stubs or your latest tax return. 
5. Finalize your loan and begin payments: Once approved, you'll receive loan documents to review and sign. Once you sign and submit those documents, the funds will be disbursed to your bank account. Then you will start making monthly payments to the lender.

Learn more: How to get a personal loan

How to improve your chance of approval

There are a few strategies you can implement in order to boost your personal loan application.

• Increase your income: Earning more could help you get approved. Consider asking for a raise, getting a part-time job, or starting a side hustle like delivering food or groceries. Plus, by earning extra cash, you may not need to borrow as much.
• Add a cosigner: Ask a trusted friend or family member with good credit to cosign the loan. Just remember that they share equal liability with you for repayment, and their credit score will drop if you're late on loan payments. Not all lenders let you apply with a cosigner.
• Get a secured loan: If your credit score is low or simply hasn't been established yet, a secured loan may be a better option. Just be sure you feel confident in your ability to repay the balance so you don't lose whatever collateral you pledge, such as your house or car. Not all lenders offer secured loans.

Pros and cons of unsecured loans

There are both benefits and drawbacks to consider before you apply for an unsecured loan.

Pros

• No collateral: You will avoid having any of your assets seized by the bank in the event you default on your loan.
• Cheaper than credit cards: Unsecured loans typically have a lower interest rate compared to credit cards, according to the Federal Reserve.
• Fixed payments: Unlike credit cards, unsecured personal loans have fixed monthly payments, so you can easily budget for them.

Cons:

• Higher interest rates: Depending on your credit profile, lenders may charge a higher interest rate to protect themselves in case you don't repay the loan.
• Smaller loan amounts: The amount you're allowed to borrow may be lower than if you chose a secured personal loan.
• Strict approval requirements: You'll need a good credit score, along with verifiable income, in order to qualify for most unsecured loans.

FAQ

What are the different types of unsecured loans?

Unsecured loans include personal loans and student loans. Most credit cards are also unsecured, although those are considered a type of revolving credit rather than an installment loan. With an unsecured loan, you receive a lump sum of cash, then make fixed payments over a set number of months or years.

Can you get an unsecured loan with bad credit?

It's possible to get approved for an unsecured loan even with bad credit, but expect to pay a higher interest rate. You may also be approved for a smaller loan amount. Compare options to make sure you don't end up paying more than necessary.

What are the different types of secured loans?

Secured loans include auto loans, mortgages, car title loans, life insurance loans, and personal loans that require collateral. In some cases, a savings account may be used to secure a loan rather than personal property. Secured loans like mortgages and auto loans may come with low interest rates. Watch out for predatory secured financing, like car title loans, which often have unfavorable terms and conditions for the borrower.

What are the common uses for unsecured loans?

Unsecured loans are often used for debt consolidation, medical bills, emergencies, and major life events. Outside of student loan lenders, most lenders have few restrictions on how the loan funds may be used. (Personal loans aren't generally available for tuition or business purposes). 

While convenient, that makes it extra important to only borrow how much you need for a specific purpose. Otherwise, you could pay a lot in interest and fees for non-necessities.

Read more:

• Where to get a personal loan
• Average personal loan interest rates
• Best personal loan rates
• Best fast personal loans
• Best installment loans
• Best emergency loans for poor credit