Loan Approval: Which Loan Is Easiest to Get?
What are the easiest loans to get approved for? It depends on what you need and what you bring to the table. The loans below all offer easy approval for different types of applicants. Look them over and see which one checks your boxes.
Unsecured Personal Loans
Unsecured personal loans require no collateral. (Collateral is an asset that you allow the lender to take and sell if you don’t repay your loan.) This makes unsecured loans riskier for personal loan providers. Your credit rating is more important for unsecured loan providers because the loan is only backed by your promise to repay it.
Why it’s easy
Personal loan approval is fast, and most approved loans fund in days, if not hours. That’s because there is no collateral to appraise and because underwriting is nearly always automated.
Why it might be hard
If your profile doesn’t easily and obviously drop into the lender’s “approve” box, you might run into problems. If your credit report is inaccurate, or your income isn’t easy to prove, or you “just miss” the lender’s minimum standards, automated systems usually decline your application. Some lenders will accept co-signers, which could help you get loan approval or a better rate even with poor credit.
401(k) Loan
Many employers allow employees to borrow against their 401(k) retirement accounts. If yours does, you can borrow up to 50% of your vested balance or $50,000, whichever is less.
Why it’s easy
With a 401(k) loan, you’re really borrowing from yourself. So there is no minimum credit score. And the interest you pay goes back to your own account.
Why it might be hard
These loans can be dangerous, however. If you quit or lose your job, you must pay back the loan or face stiff tax penalties. And while your loan is outstanding, you can’t contribute to your retirement plan. That can have serious consequences in the future.
Peer-to-Peer Loan (P2P)
P2P loans are also unsecured personal loans. But you get them from individuals instead of banks and loan companies. You apply for P2P loans online, indicating how much you need to borrow and the interest rate you’re willing to pay. The website assigns you a credit grade, and individual investors decide if they are willing to take your offer.
Why it’s easy
The advantage of P2P is that machines don’t make the decisions. Human investors do. You can explain irregularities and credit issues to these humans and sometimes get loan approval even with credit problems.
Why it might be hard
If your credit history is not good, you’ll still have difficulty getting loan approval. And interest rates for borrowers with poor credit can be even worse than credit card interest rates.
Short-Term and Payday Loans
Payday or check advance loans have very short terms (seven to 30 days) and painfully high fees. Their providers often advertise “personal loans with no credit check” or “personal loans for bad credit.” The lender advances you cash, and you repay the advance with a post-dated check to cover the loan plus its fees.
Why it’s easy
The loans are widely available online or in local branches. Most vendors will approve your application on the spot if you have a job and a checking account.
Why it might be hard
Check advance and payday loans are the most expensive in the business. Maximum loan amounts are low, and fees are high. A typical fee to borrow $300 is $60 for 14 days. That’s an APR of over 500%. Many borrowers renew their loans again and again because they cannot pay them off, and every rollover incurs a new fee.
Secured Loans
Secured loans are named because the borrower pledges some form of collateral that the lender can take and sell if the borrower fails to repay the loan as agreed. Mortgages and auto loans are secured loans backed by the house or car being financed.
Why it’s easy
Secured loans are less risky for lenders than unsecured loans. That means interest rates are lower, and the borrower’s credit is less important.
Why it might be hard
You need acceptable collateral to secure your loan. That means you must own a home, auto, financial asset, or other property acceptable to the lender. It can take longer to process these loans because the lender must appraise the collateral. The upfront fees can be higher because of the extra processing involved.
Getting matched to your personalized loan solution is fast and easy. Get started and see your rate.
Pros & Cons of Fast Loans
Pros
- Quick Approval: Some loans, like unsecured personal loans, offer rapid approval and funding, often within hours or days.
- No Collateral Required: Unsecured personal loans and payday loans don’t require you to put up assets, reducing your risk of losing property.
- Flexible Options: Peer-to-peer loans allow for personalized decisions, potentially leading to approvals even with credit issues.
- Easy Access: Payday loans are widely available and typically have minimal application requirements, making them accessible to many borrowers.
- Borrowing from Yourself: 401(k) loans offer the unique benefit of borrowing your own money, with interest payments going back into your retirement account.
Cons
- High Costs: Payday loans and some P2P loans can have extremely high interest rates, making them expensive in the long run.
- Risk of Penalties: 401(k) loans can result in significant tax penalties if not repaid, especially if you leave your job.
- Collateral Requirement: Secured loans require collateral, which can be risky if you’re unable to repay the loan.
- Limited Loan Amounts: Payday loans and short-term loans usually offer low loan amounts, which might not meet your financial needs.
- Potential for Debt Cycle: High-interest loans, like payday loans, can trap borrowers in a debt cycle due to ongoing fees and renewals.
How to Choose the Right Loan
The right loan for you depends on your needs and resources. Here are a few considerations:
- If you have bad credit, your best loans are likely to be secured. And 401(k) loans are often your cheapest and best secured option. Peer-to-peer lenders might decide to take a chance on you if you can explain your situation. The most costly and dangerous loan is the payday or short-term product.
- Applicants with excellent credit can qualify for personal loans with interest rates as low as secured loan rates. And the personal loan process is faster and cheaper.
You can easily compare personal loan interest rates, apply, and get a decision quickly online. That’s often the best way to start.
