Unsecured Loan

Unsecured loan summary:

  • Unsecured loans don’t require collateral. That means you’ll qualify based on your creditworthiness and financial situation, not whether you own something valuable you could use as a guarantee.

  • Unsecured loans are riskier for the lender, so they tend to cost more than secured loans.

  • Common examples of unsecured loans are student loans, most personal loans, and most credit cards.

Unsecured loan definition and meaning

An unsecured loan isn't guaranteed by collateral. There's nothing the lender could take and sell if you don't make your payments. The lender's only security with an unsecured loan is your promise to repay. For this reason, unsecured loans are sometimes called signature loans. Because unsecured loans are riskier to lenders than secured loans, they can be harder to get and their interest rates are usually higher. 

Key concept: You qualify for an unsecured loan based on creditworthiness and other factors, as these loans don't have collateral.

More about unsecured loans

When you borrow with an unsecured loan, you don't put up collateral. That means there’s nothing the lender could take, or repossess, if you don't repay your balance according to the terms of your loan agreement. The lender would have to come after you for repayment by contacting you, turning your account over for collection, selling your debt, or suing you. 

Advantages of an unsecured loan

The biggest advantage of an unsecured loan is that you don’t have to own anything of value that you could borrow against. Also, unsecured loans can be much faster to get because there’s no collateral to evaluate. 

Disadvantages of an unsecured loan

Unsecured loans have a couple of drawbacks. They can be more difficult to get if your credit score is low or your income is unstable. 

Unsecured loans are riskier for lenders, because there’s no collateral for them to take and sell if you don't repay the loan. To recover what they're owed, lenders could contact you, turn your account over to collections, or possibly sue you. These strategies can be time-consuming and expensive with no guarantee of success. That’s why unsecured loans generally carry higher interest rates compared to secured loans.

Common types of unsecured loans

PERSONAL LOANS

Consolidate debt with a personal(ized) loan

Simplify your life—consolidate your debts into one fixed monthly payment.

Unsecured Loan FAQs

Personal loans come in two varieties—secured and unsecured. The vast majority are unsecured. An unsecured loan is one that you qualify for based on your creditworthiness and financial situation. 

A secured loan, on the other hand, means that you’re borrowing against something of value. A car loan and a mortgage are the two most common types of secured loans. It’s possible to find a secured personal loan. For instance, some people borrow against their own savings.

There are many kinds of personal loans for common situations and they sometimes come with a label that matches the situation:

Ultimately, these are all personal loans.

The amount of money you can borrow with an unsecured loan varies based on several factors, primarily

  • Your credit score 

  • The lender’s loan limit

  • Your income and your other debt obligations

At Achieve, you can borrow up to $50,000.

Because they aren't attached to collateral, unsecured loans are a little riskier for the lender than secured loans. If something happens and you don’t repay the loan, the lender could lose money. In general, we pay more for financial products that lenders consider riskier. So if you were to shop on the same day for an unsecured personal loan and a car loan, the average interest rate for car loans would probably be lower than the average rate for personal loans.

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Personal loans are available through our affiliate Achieve Personal Loans (NMLS ID #227977), originated by Cross River Bank, a New Jersey State Chartered Commercial Bank, Equal Housing Lender. Loan applications are subject to credit review, underwriting criteria, and approval. Loans are not available in all states and available loan terms/fees may vary by state. Loan amounts range from $5,000 to $50,000. For loans $35,000+ must have a minimum 660 credit score. APRs range from 8.99% to 29.99% and include applicable origination fees that vary from 1.99% to 8.99%. Repayment periods range from 24 to 60 months. Example loan: four-year $20,000 loan with an origination fee of 8.99%, a rate of 15.49%, and corresponding APR of 20.77%, would have an estimated monthly payment of $561.60 and a total cost of $26,966.26. To qualify for a 8.99% APR loan, a borrower will need excellent credit, a loan amount less than $12,000.00, and a term of 24 months. Adding a co-borrower with sufficient income; using at least eighty-five percent (85%) of the loan proceeds to pay off qualifying existing debt directly; or showing proof of sufficient retirement savings, could help you also qualify for lower rates. Loan Consultants for Achieve Personal Loans are available Monday-Friday 6 AM to 8 PM AZ time, and Saturday-Sunday 7 AM to 5 PM AZ time.

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