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When Should I Consider An Unsecured Personal Loan?

Written by:

David Kirsch

Edited by:

Kristin Marino

Updated on February 1, 2024

Unsecured personal loans require no collateral, and are guaranteed solely by the borrower’s commitment to repay them. These types of personal loans can have a bad reputation when confused with payday loans, title loans, cash advances or other short-term forms of financing with high interest rates. For that reason, most people turn to credit cards when they want to borrow without putting up collateral, even when unsecured personal loans are most often a better choice.

Here are a few situations in which you should consider an unsecured personal loan.

1. Need to Finance a Purchase Quickly

If you are in the market to make a large purchase or cover a major expense like a vacation, an unsecured personal loan is a great choice. Unsecured loan lenders will use two main factors — the applicant’s credit rating and their debt-to-income ratio. With no collateral to appraise, online unsecured personal loans can be processed and funded fast.

2. Desire a Lower Interest Rate

It may be possible to obtain a better rate with an unsecured personal loan than with a credit card. As mentioned above, the rate offered depends in part on the applicant’s credit rating and individual lender guidelines, so it makes sense for the borrower to compare the credit card and personal loan rates that apply to them.

3. Want to Cut Spending

Unsecured personal loans also make sense for people who are tempted to spend more by easy access to credit through credit cards. With a personal loan, the borrower receives a lump sum from the unsecured loan lender and then begins repayment. As payments are made, the balance declines, and the consumer cannot run the balance back up again, which takes care of overspending.

4. Prefer a Fixed Rate and Term

Unlike credit cards, which come with variable interest rates, unsecured personal loans will most often have fixed interest rates that do not change during the loan terms. In addition, personal loans have regularly set loan payments, allowing borrowers to make the same payments at the same intervals on a set schedule until the loan is paid off. This is perfect for people on a fixed income or working within a strict budget that don’t want the worry about increasing payments.

To get the best rate on an online unsecured personal loan, it’s important to shop and compare rates and terms from competing unsecured loan lenders. Here at AmONE, we make that part easy! To find an unsecured personal loan online, visit AmONE now.

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Advertiser Disclosure*. The financial products and services on this site are from advertisers from which AmONE receives compensation. Compensation may be based upon whether you click on certain links on this site or buy products or services from those advertisers. We do not receive compensation from consumers. The placement of advertisements on this site are based in part upon the compensation AmONE has or expects to receive from those advertisers. Placement of advertisements does not reflect our recommendation of any advertisers' products or services. Please consult a financial services professional before making any financial decisions. Our advertisers do not include all the financial products and service providers available in the marketplace.

Loan availability, rates, APRs (Annual Percentage Rate), and other terms vary by advertiser and borrower attributes, including borrower location. Lenders have a range of available APRs; only borrowers with excellent credit will qualify for the lower rates. As of 01/11/2024, our advertisers were offering loans to some consumers for as little as a 6.40% APR on a three-year $100,000 loan.

We do not provide financial products or services. Rather, AmONE provides administrative and marketplace services by attempting to connect consumers with service providers offering products and services such as debt settlement and personal loans. We do not take applications or make credit decisions. We may not be able to match you with any of our advertisers. Credit and other decisions and terms are determined by our advertisers based upon the consumer's submission of an application to the advertiser, which may obtain other information about the consumer from third parties. Approval for financial products and services by an advertiser is not guaranteed.

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