How to Find an Unsecured Loan

Unsecured loans are those which are not secured by any collateral. A lender who extends a personal loan to a customer trusts his ability to repay the debt based on his income and credit. Unsecured loans come in many forms. Some examples include revolving loans, closed-end loans and credit cards. If you need an unsecured loan, you first need to figure out how much you need and what type best suits you.

Instructions

1

Pull a recent copy of your credit report at Annual Credit Report. This is a federally-mandated website dedicated to providing US citizens with free credit reports. You'll need to pay for your FICO score, however. This three-digit number tells lenders how creditworthy you are. Scores above 720 are excellent; scores below 600 are poor.

2

Review the unsecured loan options. The most common unsecured loan is the credit card. This is a revolving loan that only mandates a minimum payment. These loans are notoriously difficult to repay. Another option is the closed-end account. These are similar to car loans. Each month you make a standard payment and at the end of a predetermined period of time, the loan is repaid.

3

Calculate your debt to income ratio (DIR). This is the calculation lenders use to ensure your ability to repay the loan. To find your DIR, divide the total of all monthly bills (excluding any that do not report to the credit bureau) by your total gross monthly income. Most lenders want to see a DIR below 45 percent prior to extending credit.

4

Look for lenders. If you have a solid FICO score and a low DIR, you should look exclusively at local banks and credit unions. However, if you have some problems on your credit, you must also look at finance companies, such as CitiFinancial and Wells Fargo Financial. You can also conduct internet searches for low-interest credit cards.

5

Apply to only three or four lenders. Excessive applications will generate excessive credit inquiries--this could lower your FICO score. Be honest with the loan officers. Falsely enhancing any aspect of your application may haunt you later down the road, usually in the form of overwhelming payments.

6

Choose the loan option that best meets your needs. Give the loan officer copies of your income documents if required. This will help the approval process.