Getting an Unsecured Personal Loan

You’re really struggling, and you need a loan fast! Unfortunately, it’s harder to attain that loan than you originally thought it would be. An unsecured personal loan will allow you to acquire the funds you need without needing to put something up as collateral–but it’s important to understand how that loan works and how you can acquire one. Loans Now can help you get the funds you need to proceed with your life, whether you’re gearing up for a cross-country move, trying to consolidate credit card debt, or paying for an emergency that’s hit in your life.

Collateralized Loans

Collateralized loans, or loans that require collateral, are typically easier to secure than a personal unsecured loan. This is for one key reason: these loans allow the lender to take something back if you default on the loan. Often, items like your car or your home are used for these loans. Unfortunately, sometimes, you don’t have one of those items to use to secure the collateral for your loan. If you do have this option, keep in mind that the process may move more smoothly and you may be able to get better overall terms for your loan, since the risk to the lender is less severe.

Uncollateralized Loans

An uncollateralized loan, or an unsecured personal loan, is more difficult to secure. This type of loan does not require collateral. In order to get this type of loan, you’ll need to take several key steps.

First, check your credit. If you have poor credit, you’re going to struggle to take out an unsecured personal loan–and chances are, even if you’re able to get one, the terms aren’t going to be as good as you’d like. Your credit score will help determine what loan options are available to you and how you need to go about securing your loan. You can access a free copy of your credit report from any of the three credit reporting agencies: Experian, Equifax, and TransUnion. Checking your credit annually is a smart move, since it can help you keep track of your credit score and ensure that you can make needed changes to improve your credit as well as letting you know what options you have available.

Know your options. Do you need to get a personal loan with bad credit? If so, consider working with online lenders who specifically deal with individuals with low credit scores. These organizations were designed to help people just like you worry less about the need for emergency funds.

Get pre-qualified. If you have a little bit of time before you need your personal unsecured loan money in your hands, take the time to get pre-qualified. Through this process, lenders will do a soft check of your credit, which won’t impact your overall credit score. Then, they’ll take the relevant information–your income level, your current monthly payments, and other key factors–and determine what type of loan you might qualify for.

Choose the terms that are right for you. Check out what lenders can offer you in terms of unsecured loans. Evaluate things like interest rates and repayment terms as well as how much money you can receive. Keep in mind that a bigger loan isn’t always better: the less money you borrow, the sooner you’ll be able to get out of debt and pay it back.

Take the right information. There are several key pieces of information that you’ll need to provide in order to get an unsecured personal loan. This includes:

  • Your social security number
  • Your debt-to-income ratio
  • What payments you’re already making each month, including student loan payments, car payments, house payments, and any other relevant debts as well as rent, insurance, and other recurring fees
  • Pay stubs or tax forms showing your income
  • Your employer’s name and address
  • Relevant information for co-signers, including your spouse, if relevant

Calculating Your Debt-to-Income Ratio

Your debt-to-income ratio is the amount of debt you have compared to the amount of your income. A debt-to-income ratio of around 43% will, in many cases, prevent you from securing a mortgage, while a debt-to-income ratio of less than 36% is recommended for most individuals. Knowing how to calculate that number can help you understand what types of loans you’ll qualify for as well as how much you can expect to spend on payments.

Step One: Calculate Your Income

This is the amount you actually bring home on each paycheck, minus any associated taxes. For your personal use, it can be beneficial to remove the amount you pay into savings or pay as a tithe each paycheck; lenders, however, won’t calculate that amount. If you have variable income due to freelancing, contract work, or changing hours, it’s important to calculate your income over several months in order to get an average.

Step Two: Add Up Your Debts

What debts are you responsible for paying off each month? Make sure that you include all of them in your calculations–your lender will! Gather information about:

  • Your mortgage
  • Your car payments
  • Your student loans
  • Your credit cards
  • Any other loans you’ve taken out

Step Three: Do the Math

Your debt to income ratio is the amount of your debts that you must pay each month divided by your income each month. For example, if you have a monthly income of $8,000 and a monthly debt payment of $1,500, your debt-to-income ratio is 18.75%. If your payments are at $3,000 on that same monthly income, your debt-to-income ratio will be 37.5%.

Understanding Your Financial Situation

Before you jump in with a loan, it’s important to understand your own financial situation. Are you making enough money to support your regular expenses? Do you struggle with excess spending as debt mounts? If you struggle with a high debt-to-income ratio or you’re failing to meet your regular monthly payments, reducing your spending and paying down that debt will help get your finances under control and raise your odds of being able to secure a loan when you need one. Even if you’re struggling with your finances, however, it’s important to have a strong understanding of your financial situation so that when you do need to apply for a loan, you know what to expect.

At Loans Now, we want to help you through the loan acquisition process and help you get the money you need in your hands as soon as possible. If you need help getting an unsecured personal loan, contact us today to learn more about how we can help you meet your financial goals.

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