Best Unsecured Loans of May 2024
Updated May 1, 2024 at 12:24 pm
Unsecured personal loans don’t require you to risk collateral like a bank account or car title. Depending on your financial situation, they may even be cheaper than other forms of debt.
But personal loans have drawbacks, and loan amounts, eligibility requirements and repayment terms vary widely. So it can take time to find the option that best matches your needs. To help, we researched and compared lenders based on APR range, fees, and other factors to come up with a list of some of the best unsecured personal loans.
Our Methodology Newsweek Vault’s loan experts evaluated multiple data points to help our readers make sense of their borrowing options across student loans and personal loans. To narrow down the best available offers, we weigh the product pros and cons across five core categories, including:
- Application process
- Eligibility requirements
- Interest rates
- Loan amounts (minimum and maximum)
- Repayment flexibility
Our Picks - Best for Flexible Repayment Terms: LightStream
- Best for Small Loan Amounts: PenFed
- Best for Large Loan Amounts: BHG Money
- Best for Bad Credit: Avant
- Best for Debt Consolidation: Happy Money
- Best for Same-Day Funding: SoFi
- Best for Low Rates: Discover
- Best Peer-to-Peer Loans: Prosper
- Best for Minimal Credit History: Upstart
- Best for Applying With a Co-Signer: Laurel Road
Compare Personal Loans
10 Best Unsecured Loans of 2024
Best for Flexible Repayment Terms
LightStream
on Credible’s website
Why We Chose It
LightStream offers repayment terms from 24 months to 84 months for most purposes, but you can choose a term up to 144 months for home improvements. Plus, the lender doesn’t charge any fees.
Pros
- Wide range of repayment terms
- Autopay discount
- No fees
Cons
- Doesn’t permit co-signers
- Must have good-to-excellent credit
Best for Small Loan Amounts
PenFed
Vault Verified
Why We Chose It
PenFed has a minimum loan amount of only $600, though qualified applicants can borrow up to $50,000. The lender also has a low APR range compared to other lenders.
Pros
- Loan amounts start from $600
- Low APR range
- No origination fees
Cons
- Late fee
- Membership required
- Maximum loan amount is lower than some competitors
Best for Large Loan Amounts
BHG Money
on Credible’s website
Why We Chose It
BHG Money allows qualified applicants to borrow up to $200,000, making it a good option for consumers with high incomes. Plus, it offers flexible repayment terms up to 10 years.
Pros
- High maximum loan amount
- Flexible repayment terms
- Prequalification available
Cons
- Minimum loan amount is $20,000
- Funding takes at least five business days
- Not available in Maryland or Illinois
Best for Bad Credit
Avant
on Credible’s website
Why We Chose It
Avant has a low minimum credit score requirement of 580, so you may qualify even with bad credit.
Pros
- Low minimum credit score requirement
- Fast funding
- Option to prequalify
Cons
- High maximum rate
- Late fee
- Low minimum loan amount compared to other lenders
Best for Debt Consolidation
Happy Money
on Credible’s website
Why We Chose It
Happy Money offers a product funded by its lending partners called The Payoff Loan that’s designed to help you pay off up to $40,000 in credit card debt, though a representative stated you can use funds for other purposes as well.
Pros
- Wide range of repayment terms
- Option to send funds directly to credit card issuers
- No late or returned payment fees
Cons
- Higher starting APR than some competitors
- Origination fees
- High minimum loan amount
Best for Same-Day Funding
SoFi
on Credible’s website
Why We Chose It
Most approved SoFi personal loan applicants receive funds the same business day, according to SoFi’s website. In addition, origination fees are optional, and the lender offers unemployment assistance for eligible borrowers.
Pros
- No fees
- Unemployment protection
- Possible same-day funding
Cons
- $5,000 starting loan amount
- May have to pay origination fee for lowest rate
- Co-signers aren’t permitted
Best for Low Rates
Discover
on Credible’s website
Why We Chose It
Discover offers personal loans up to $40,000 with a competitive APR range and no origination fee. In addition, qualified borrowers get free access to their FICO scores.
Pros
- Low starting APR
- Free FICO score
- No origination fees
Cons
- Late fee
- Need to earn at least $25,000 per year
- Joint loans aren’t available
Best Peer-to-Peer Loans
Prosper
Vault Verified
Why We Chose It
Prosper offers one of the lowest starting APRs. Once approved, you can receive funds the next day.
Pros
- Low minimum APR
- Fast funding
- Joint loans are available
Cons
- Origination fees
- Limited repayment terms
- Not available in Iowa or West Virginia
Best for Minimal Credit History
Upstart
on Credible’s website
Why We Chose It
Upstart offers personal loans that are accessible to borrowers with minimal credit history. The lender considers non-traditional factors when reviewing your application, such as your education and employment.
Pros
- Applicants may get approved with minimal credit history
- Option to prequalify
- Fast approval times
Cons
- Possible origination fee
- High maximum APR and origination fee
- Only two repayment terms available
Best for Applying With a Co-Signer
Laurel Road
Vault Verified
Why We Chose It
Laurel Road allows you to add a co-signer to your loan application if you’re having trouble meeting its eligibility requirements. Plus, unlike some lenders, Laurel Road allows you to use funds for business expenses.
Pros
- Co-signers allowed
- Option to prequalify
- Using funds for business expenses is allowed
Cons
- Funding may take up to seven business days
- Limited repayment terms
- Starting APR is higher than some competitors
What Is an Unsecured Loan?
An unsecured personal loan is a financial product that doesn’t require you to risk collateral—such as a bank account or home equity—to qualify. Instead, your eligibility is primarily based on other factors, such as your credit score, income, and monthly debt load.
You can get one of these loans from several places, including banks, credit unions and online lenders. To qualify for the best personal loan rates, you typically must have excellent credit.
Types of Unsecured Loans
The most common types of unsecured loans include:
- Personal loans: One of the most versatile unsecured options because they can be used for many purposes, including debt consolidation, car repairs and emergencies.
- Credit cards: Revolving finance option that is usually unsecured. Like personal loans, you can use a personal loan for almost any legal purpose. Some even let you avoid interest charges for a limited time.
- Student loans: Offered by private lenders and the federal government, these unsecured loans help students pay for tuition and other school-related expenses like textbooks and meal plans.
How Do Unsecured Loans Work?
Once approved, a lender generally deposits a lump sum into your bank account or sends funds directly to your creditors. Afterward, you repay the loan over a specific time frame, usually between 24 to 84 months.
Personal loan companies usually report payments to the major credit bureaus, so on-time payments can help improve your credit. But on the flip side, defaulting on the loan can harm your credit, making it harder to qualify for future financing.
Why Would You Need an Unsecured Loan?
You can use an unsecured personal loan for just about any legal reason. Some popular uses include:
- Home improvements. You can use funds to tackle various home renovation projects like remodeling your bathroom or adding a deck to your backyard.
- Debt consolidation. Consolidating high-interest debt with a debt consolidation loan could save you hundreds of dollars if you can secure a lower rate than your existing debt.
- Moving expenses. Relocating can be expensive, even if you’re moving to a new home in the same city. Consider using a personal loan if you can’t pay moving costs out of pocket.
- Tax debt. In addition to setting up an installment agreement with the IRS to pay your tax bill, you could also use a personal loan. Just make sure to compare fees to ensure you’re choosing the least expensive option.
- Medical bills. If you’re unable to get an interest-free loan through your medical provider or qualify for financial assistance, using a personal loan could help.
How to Choose the Best Unsecured Loan
Below are some factors you should consider while comparing your options.
- Annual percentage rate (APR). Comparing potential APRs by prequalifying with several lenders is one of the best ways to evaluate your borrowing costs since it includes interest and any fees a lender charges.
- Repayment terms. Repayment terms also influence your monthly costs. Choosing a shorter repayment term can lead to higher payments, while a longer repayment term usually comes with lower payments. Pick the term that fits your financial situation.
- Funding speed. If you want to receive personal loan funds fast, choose a lender that offers same- or next-day funding.
- Loan amounts. Some lenders offer small- to medium-sized loans, while others offer personal loans up to $200,000. Select a lender that offers the loan amount that fits your budget.
- Lender reputation. You can read customer reviews on platforms like Trustpilot to learn what other applicants have to say about the lender.
Pros and Cons of Unsecured Loans
Although unsecured loans come with many benefits like fast funding, there are some drawbacks to consider.
Pros
- Fast funding. Many lenders can deposit funds into your account the next business day.
- May be cheaper than some alternatives. Average personal loan rates are usually lower than some other types of debt like credit cards.
- Predictable payments. Your payments remain fixed over the life of the loan.
Cons
- Origination fees. Some lenders charge origination fees for processing your loan application, which can increase your overall borrowing costs.
- More stringent eligibility requirements. Unsecured loans are riskier to lenders than secured loans. So they usually have strict eligibility requirements. As a result, borrowers with bad credit usually have more limited options than applicants with strong credit profiles.
- Maximum rates may be high. Although average rates are often lower for personal loans than credit cards, some lenders have maximum advertised APRs over 30%.
How to Get an Unsecured Loan
Here are the typical steps you take to apply for an unsecured loan.
- Prequalify. To compare your options, prequalify with several lenders to preview rates and terms you could receive. But prequalifying doesn’t guarantee approval.
- Submit a formal loan application. After you’ve selected a lender, submit a full loan application. During this step, a lender may require you to provide additional documentation, such as your most recent pay stubs and bank statements.
- Review loan agreement. If approved, a lender should send you a loan agreement. Review this document carefully to ensure you agree with the terms before signing.
- Repay your loan. Make on-time payments to avoid late fees and possible credit damage. Enrolling in autopay is an easy way to minimize the possibility of late payments.
Alternatives to Unsecured Loans
Here are some alternative financing options to consider if an unsecured loan isn’t the right fit for you.
Secured Personal Loans
Although personal loans are generally unsecured, some lenders like Best Egg offer secured options. These loans work just like other personal loans but require you to pledge an asset a lender can take like a savings account. If you fail to repay the loan on time, the lender can seize your collateral to satisfy the debt.
Credit cards
The best credit cards can be a solid option to cover a range of needs, including debt consolidation and emergencies. You typically need good-to-excellent credit, and average rates tend to be higher for credit cards. But people who can pay their credit card balance in full each month can avoid interest charges. This makes credit cards more affordable than personal loans, which don’t offer the chance to avoid interest charges.
Home Equity Loans
Another lump-sum option is a home equity loan. Eligibility depends on how much available equity you have in your home. Repayment terms for these loans generally range from five to 30 years. Before you apply, understand that you could end up losing your home if you can’t repay the loan.
Secured Line of Credit
If you want to borrow money to cover an ongoing project, a secured line of credit might be a better option. Some lenders allow you to secure the line of credit with a savings account. Once approved, you can borrow as needed up to your credit limit.
Frequently Asked Questions
Is It Hard to Get an Unsecured Personal Loan?
How difficult it might be to qualify for an unsecured loan depends on factors like the lender’s eligibility requirements and individual factors, such as your credit score and how much debt you have. The lower your debt-to-income (DTI) ratio and the better your credit profile, the higher your approval chances.
What’s the Largest Personal Loan You Can Get?
The answer depends on the lender but maximum loan amounts usually range from $40,000 to over $100,000. But the amount you’re approved to borrow will depend on your income, credit and other factors.
What Credit Score is Needed for an Unsecured Personal Loan?
The credit score you need varies by lender. Some lenders only approve applicants with good credit, while others approve applicants with scores as low as 580 or lower.
Editorial Note: Opinions expressed here are author’s alone, not those of any bank, credit card issuer, hotel, airline or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post. We may earn a commission from partner links on Newsweek, but commissions do not affect our editors’ opinions or evaluations.
