Best Unsecured Personal Loans for 2018

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A personal loan can get you the money you need in short order if you qualify. Personal loans are a popular tool for consolidating and eliminating high interest credit card debt. Just like credit cards, these personal loans don’t require collateral — they are unsecured. But unlike most credit cards, most personal loans offer fixed interest rates and payments, making them much easier to work into a budget. You’ll also probably be able to borrow a greater chunk of change than you could cover with a credit card, possibly at a lower rate.

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The Simple Dollar’s Best Personal Loan Picks

If you want to get started on your search right now, here are a few lenders that stood out as I looked for the best personal loans:

The personal loan space is growing with a number of online lenders challenging credit-card companies and traditional banks. In 2018, the trend toward a streamlined lending process, better interest rates and more transparent lending criteria will continue.

In fact, some brick-and-mortar banks are only recently returning to this kind of lending after the subprime mortgage crisis. So if you’re in the market for an unsecured personal loan, you’ll have plenty of options, especially if you have good credit.

As you read on, I’ll discuss unsecured personal loans in greater detail, why they’re difficult to obtain with bad credit, and strategies you can use while shopping to make sure you find a loan that’s right for you.

When and When Not to Use a Personal Loan

Before you get an unsecured personal loan, there may be other options to explore first depending on your situation and goals. Personal loans are great if you do not want to pledge anything as collateral, or you don’t have any collateral to pledge. However, unsecured loans probably won’t get you the best rate. For instance, a home equity loan will net you much better terms because it’s less risky for the lender. Also, some lenders have tailored loans for people with bad credit, which may or may not require collateral.

It’s not a wise idea to use a personal loan for a discretionary purchase because of potentially high interest rates. However, personal loans have their place. For instance, you may be a small business owner who needs to cover your quarterly taxes until a major supplier pays their invoice. Or perhaps you want to consolidate high-interest debt and can better manage a single payment.

Best Personal Loans Overall

The companies below are among the biggest names in personal lending, targeting borrowers who have solid credit (and better). They’re worth considering for anyone who needs an unsecured personal loan. However, if your credit is top-notch — or not so hot — make sure you keep reading for some lenders that target excellent- and average-credit borrowers.

Lending Club

One of the biggest peer-to-peer lenders, Lending Club makes loans up to $40,000. Though very similar to other peer-to-peer lenders in many ways, it is a bit more lenient with credit scores, requiring a minimum of 600, but a bit stricter with other criteria such as debt-to-income data. APRs range from 5.99% to 35.89%* APR. Best APR is available to borrowers with excellent credit.

LendingClub does business in 49 states (right now, you’re out of luck in Iowa). LendingClub also charges a loan origination fee from 1% to 6% and charges a $7 processing fee for each monthly payment made by check. Terms are three or five years.

Why it’s a solid bet: LendingClub is a major player and pioneer in the peer-to-peer lending business. Their strengths include competitive interest rates, wide availability, and transparency. If you’re thinking of seeing what kind of rate you can obtain, applying for a loan through LendingClub generates a “soft inquiry” that won’t impact your credit score.

Wells Fargo

If you have good credit and would rather keep your business with a long-established bank, Wells Fargo could be a good option. With advertised APRs of 6.74% to 19.74% ($10,000 three-year loan, including 0.25% relationship discount) and loans from $3,000 to $100,000, this brick-and-mortar lender could be worth a look for any borrower with solid credit.

Repayment terms can range from 12 to 60 months and there are no prepayment or origination fees. The main downside here is convenience: You can’t apply online unless you’re an existing Wells Fargo customer, so you’ll need to be near one of their branches. Wells Fargo also doesn’t fare as well as many competitors in customer service ratings, and they aren’t as transparent about lending criteria as many online competitors.

Why it’s a solid bet: When it comes to a loan, some people prefer doing business face to face. If you’re among them, Wells Fargo offers competitive rates, the comfort of a big name, and the convenience of a huge branch network — there are more than 6,000 locations nationwide. Wells Fargo also offers a couple of other options that aren’t as common with online lenders: a more flexible personal line of credit as well as a loan that you can secure with a savings account or CD in order to get a lower rate.

Prosper

Prosper is slightly more liberal with its lending criteria than major competitors. It requires a minimum credit score of 640, but Prosper will look at several other factors to give you a shot at a better interest rate. Loan terms are three years and five years. You can borrow from $2,000 to $35,000 at APRs ranging from 5.99% to 35.99% for first-time borrowers.

Interest rates and fees are easy to find and evaluate, and Prosper can make loans in 46 states (loans aren’t available in Iowa, Maine, North Dakota, and West Virginia). You could be waiting seven business days for your loan to be funded, however.

Why it’s a solid bet: Along with Lending Club, Prosper is one of the biggest names in peer-to-peer lending, which should inspire confidence in anyone who is leery of dipping a toe into online lending. It is impressively transparent, widely available, and a bit looser with lending criteria such as debt-to-income ratio and the number of recent credit inquiries on your credit report.

Best Personal Loans for Excellent Credit

If you have great credit, good news: You may qualify for personal loans with impressively low interest rates. However, keep in mind that lenders who offer these low rates will also want to see other markers of financial health, such as steady employment and a low debt-to-income ratio.

LightStream

LightStream, an offshoot of SunTrust Bank, offers excellent rates for creditworthy borrowers, currently 2.49% – 17.49% (rates as of January 2018), for non-home and auto-related personal loans. Another pro: There are no fees for loan origination, prepayment, or anything else..

The main downside here is the high threshold you’ll have to meet to qualify. Your credit score will have to be good and you can potentially have your money in as little as a day, but you’ll also need to prove “stable and sufficient” income and assets as well as a solid savings history, among other requirements.

Why it’s a solid bet: LightStream’s flexible terms and high borrowing limits make it a good choice for prospective borrowers who need a hefty amount and a longer time to pay it back. Loans of $5,000 to $100,000 are available, and terms can be anywhere from 24 to 84 months. If you need money fast, LightStream is also speedier than peer-to-peer competitors — you can have your money in as little as a day.

* Monthly payments for a $10,000 loan at 5.99% APR with a term of 3 years could result in 36 monthly payments of $304.17. Rates as of 1/2/2018.

SoFi

SoFi may be best known for student loan refinancing, but it also offers extremely competitive personal loans from $5,000 to a whopping $100,000. There are fixed rate options ranging from 5.49% – 14.24% APR (with AutoPay) and variable 5.365% to 13.365% APR (with AutoPay). You also won’t pay any fees for loan origination or anything else.

Choose from three-, five-, or seven-year repayment terms. You’ll need to meet a high threshold to qualify, with a favorable debt-to-income ratio, dependable employment, and a high credit score. SoFi holds consumer lending licenses in 22 states and Washington, D.C.

Why it’s a solid bet: If you’re a rate hawk, SoFi features some of the lowest rates I saw, and its variable-rate option offers a chance for even more savings if you’re willing to accept the risk that rates will rise. (Interest rates on variable rate loans are capped at 14.95%.) SoFi also sets itself apart with its hefty loan amounts of up to $100,000 and a unique unemployment protection program that allows you to suspend loan payments.

Disclaimer: Fixed rates from 5.49% APR to 14.24% APR (with AutoPay). Variable rates from 5.365% APR to 13.365% APR (with AutoPay). SoFi rate ranges are current as of April 11, 2018 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.365% APR assumes current 1-month LIBOR rate of 1.88% plus 3.735% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.

Earnest

Earnest, a relatively recent startup, bills itself as “low-cost loans for the financially responsible.” Indeed, this online lender offers fixed rates starting at 5.25% APR on loans up to $50,000. It also looks beyond your credit score to evaluate other criteria including education, career, and savings.

On the downside, Earnest only offers one-, two-, and three-year loans, but the company will work with you to match repayment terms to your budget. Loans are available in 45 states and Washington, D.C.

Why it’s a solid bet: Earnest could be a great option for younger borrowers who may not have a long credit history. Keep in mind that whatever history you do have will need to be mostly blemish-free, and you’ll also have to show that you have a healthy savings account and income that can easily support living expenses and a loan.

Best Unsecured Loans for Average Credit

It can be hard to find a personal loan with a reasonable interest rate if your credit isn’t top-notch. The lenders below will still consider you if you have less-than-sterling credit, with rates that are much better and practices that are much more reputable than payday lenders and the like.

PersonalLoans.com

PersonalLoans.com offers several types of loans from traditional bank personal loans, peer-to-peer loans, and installment loans. This service is available in all 50 states and loan amounts go up to $35,000 with APRs ranging from from 5.99% to 35.99%.

Keep in mind, PersonalLoans.com is only a referral site and not a direct lender. This makes it hard to know in advance of any critical information that might be easier to understand with a direct lender such as which fees will be attached to your loan or which APR rates will be offered.

Why it’s a solid bet: PersonalLoans.com is a great option for borrowers looking for a quick turnaround on their loan. Just a three-step application process and you can have loan approval in minutes. Not only is it a well designed and informative website, but, since PersonalLoans.com is a referral resource, they can find you multiple offers with competitive interest rates, which is a huge timesaver when shopping around.

Peerform

While most peer-to-peer lenders focus on borrowers with good or excellent credit, Peerform is an option for borrowers with credit scores as low as 600. Its APRs are competitive (5.99% to 29.99%), and its fees are clearly disclosed.
However, this lender is only available in 42 states, and you may need to wait up to two weeks to get your money as investors decide whether to fund your loan. Peerform also charges several fees, including up to 5% for loan origination, a Late Payment Fee and a Check Processing Fee.

Why it’s a solid bet: Peerform’s rates are among the best you’ll find with average credit, and the website is impressively transparent about exactly what you’ll need to qualify for a loan. Peerform also lends up to $25,000, a generous amount for average-credit borrowers. Just be aware that you won’t be able to choose a repayment term with Peerform — all loans require a three-year term.

Avant

Through Avant, you could borrow from $2,000 to $35,000* with rates ranging from 9.95% to 35.99%, depending on your credit history, income, and other factors. There’s also an administration fee of 4.75%**. Avant is available in 46 states and the District of Columbia.

Why it’s a solid bet: Loans of as much as $35,000 are hard to come by if your credit isn’t top-notch, and while the APRs aren’t the lowest around, they’re still fair for an unsecured loan at that level. Since Avant isn’t a peer-to-peer lender, you can have your money more quickly since you don’t have to wait around for investors to fund your loan.

* The actual loan amount, term, and APR amount of loan that a customer qualifies for may vary based on credit determination and state law. Minimum loan amounts vary by state.

**Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33.

Avant branded credit products are issued by WebBank, member FDIC.

Best Personal Loans: Summed Up

Personal Loan Provider Best For…
1 LendingClub Best Overall
2 Wells Fargo Best Overall
3 Prosper Best Overall
4 LightStream People with excellent credit
5 SoFi People with excellent credit
6 Earnest People with excellent credit
7 PersonalLoans.com People with average credit
8 Peerform People with average credit
9 Avant People with average credit

How I Picked the Best Personal Loans

You’ll want a competitive rate from your unsecured loan, but you’ll also want the flexibility to pick a term that works for you, low or no extra fees, and a lender with whom you’re comfortable doing business. Here are the factors I considered when picking the best unsecured loans:

  • Low APRs: The lender’s advertised interest rates are in line with or better than those advertised by the competition.
  • Low or no fees: Some lenders don’t charge fees other than interest; others may charge origination fees, late payment fees, or prepayment fees. If fees are present, they must not be significantly higher than its competitors’.
  • Higher loan limits: Though you want to be careful not to borrow more than you can afford, the best lenders won’t cap their loans at low amounts, letting you borrow what you need.
  • Flexible terms: Some lenders only allow you to pick from a couple of terms, such as three or five years. Lenders earned points for flexibility for allowing shorter or longer terms to accommodate a wider range of needs.
  • Serves most of the country: While most major banks have national reach (or close to it), online lenders may only be able to do business in a limited number of states. Bonus points went to lenders with a wider reach.
  • Transparent, informative website: The best lenders are transparent about APRs, loan limits, terms, fees, and other crucial information. It should be clear where to get these details, and you shouldn’t have to give your personal information in order to see it.
  • Reputation: I considered each lender’s longevity, online reviews, and status with the Better Business Bureau. BBB accreditation is a plus, not a necessity, especially for newer companies. I gave individual reviews less weight, as many negative reviews are from prospective borrowers unhappy about being denied.

Of course, before you decide to take out any loan, it’s always wise to educate yourself. Keep reading to make sure you know exactly what you’re getting with an unsecured loan and how to score the best deal.

What Is a Personal Loan?

An unsecured personal loan is simply a fixed-rate loan that you can receive without collateral to guarantee it. With secured loans, you’re allowing the lender to use one of your assets — for instance, your car or house — to recoup their losses if you fall behind on payments. When your loan is unsecured, the lender has no such recourse if you don’t pay up.

Of course, that doesn’t mean there are no consequences if you default on an unsecured loan. Your credit will take a nosedive, and your lender could sue or send its very unpleasant collections department after you. However, the lack of collateral ultimately means unsecured loans are riskier for the lender.

Unsecured personal loans are available at certain banks and credit unions, as well as online through startups including peer-to-peer lenders. Though the lender may ask why you’re borrowing, you can generally use these loans for any purpose: debt consolidation, home improvement, business expenses, new cars, a budget-busting wedding, or even a trip around the world. Credit cards and student loans are also unsecured loans, though with more specific purposes.

Do I need good credit for a personal loan?

For the most part, yes. It’s possible that you’ll find a willing lender even with poor credit, but you’ll likely be paying an astronomical interest rate in order to lessen that lender’s risk.

Major peer-to-peer lenders typically won’t lend to borrowers with credit scores lower than roughly 640-660, and if your score is that low, your APR will be well into the double digits. For instance, peer-to-peer lender Prosper offers APRs as low as 5.99% for borrowers with the best credit. Borrowers with the lowest scores could be paying 35.97%.

If your credit isn’t great, experts advise starting with your existing bank, which may have a better idea of your finances. You may also want to try a credit union, which may be more flexible with its lending criteria. But a secured loan will almost certainly get you a better APR if you’re willing to put up the collateral. So will a co-signer with better credit, but that person will be on the hook for repayment if you default — a tremendous financial risk that could certainly ruin your relationship.

A word of caution: You may run across lenders who say they’ll give you an unsecured personal loan without even checking your credit. This is a common proclamation among payday lenders, who only require proof of income to make you a small, short-term loan. But the APR could be in the triple digits, and you may end up rolling over the loan from one month to the next when you have no real ability to repay. As a rule, be wary of any no-credit-check loan.

If you’re searching for a loan with bad credit, be sure to check out my post on the best bad-credit loans for some more reputable options.

Can I convert a secured loan to an unsecured loan?

Unfortunately, it’s much easier the other way around: to turn unsecured loans into secured loans.

It is possible to convert a secured loan to an unsecured loan. However, if you’re considering a conversion because you’re unable to make payments, you may not have much luck.

  • Consider refinancing
  • Consider a consolidation loan
  • Declare bankruptcy as last resort

Consider refinancing: If you’re able to make payments consistently on your initial secured loan, your lender may be open to refinancing. It especially helps if your credit score has improved since you took out the loan.

If, for whatever reason, your original lender isn’t willing to work with you, then there is another step:

Consider a consolidation loan: The main reason people take out unsecured personal loans is for debt consolidation. And that doesn’t just refer to credit card debt. If you can find a lender that’s willing to work with you, then a consolidation loan might be a step in the right direction.

You’ll likely get less favorable rates when you consolidate. But you’ll be exchanging a lower rate for an unsecured loan. You have to decide which matters more to you.

If you can’t find any independent lenders willing to work with you, there is one more possibility:

Declare bankruptcy as a last resort: Declaring Chapter 7 bankruptcy will put a lien on certain secured debts – or they’ll be written off altogether. A lien is treated differently than a secured debt. There is the possibility of keeping your collateral, but there is also still the possibility of losing it.

Declaring bankruptcy is a life-altering event. Be sure that it’s the absolute best option for you, and do your homework before moving forward.

Personal loans vs. credit cards

Multiple studies show that millennials increasingly prefer personal loans over credit cards. While credit cards have strengths that personal loans don’t, they’re not the ideal choice for every type of purchase.

You might be considering whether to use a personal loan or a credit card to finance expenses. Here’s how both stack up:

Type of: Personal Loan Credit Card
Loan: Unsecured, secured Unsecured, secured
Debt: Installment Revolving
Interest: Fixed APR

In short, personal loans are best for financing larger purchases or long-term expenses, while credit cards are better for smaller, everyday debts.

Secured vs. unsecured debt

Borrowers can find unsecured and secured options with both personal lenders and credit card issuers.

Banks, credit unions, and other private lenders offer both unsecured and secured personal loan options. The main difference involves whether or not the borrower is required to put up collateral.

Credit card issuers also offer secured credit card options – but these cards require security deposits. In other words, borrowers put down money as collateral, not personal property such as cars or homes.

Secured loans come with lower interest rates. Since the lender has the right to repossess collateral in case of default, they take on less risk.

Type of debt

Personal loans are installment debt. Installment debt is simple: Borrowers repay their loan with fixed monthly payments over a prearrange period of time. Unsecured installment personal loans last on average 2-5 years.

Credit cards are revolving debt. Cardholders are able to borrow for a predetermined period of time. Once that period concludes and cardholders pay off their bill, they’re able to borrow again for the next month. Unlike with installment debt, revolving debt does not come with fixed monthly payments.

Type of interest

Personal loans offer fixed interest. Like installment debt, fixed interest is simple: Borrowers will pay a set amount of interest every month. Lenders determine the amount of interest borrowers pay via a number of factors, including credit score, type of loan, and national interest rates.

One of the ways that credit card companies determine interest charges for a billing cycle involves the average daily balance. The formula uses the sum of balances at the end of each day, divided by the number of days in that billing cycle. That number is then multiplied by the card’s APR (annual percentage rate).

Issuers will only charge average daily balance if cardholders fail to pay off their card in full at the end of the month. So if you miss a payment, or if you just make the minimum payment, you might be paying more than you expect.

What is an unsecured guarantor loan?

An unsecured guarantor loan is essentially the same as an unsecured loan with a cosigner attached. The guarantor, like a cosigner, is an individual responsible for paying the loan if you default.

There is one key difference: A cosigner is an explicit co-owner of an asset. A guarantor does not own the asset but simply guarantees payment.

Typical guarantors tend to have more credit history, and a higher credit score. That makes an unsecured guarantor loan an ideal option for someone who has bad credit, or little to no credit history. Students often require guarantors for various loans, as do small businesses that are just beginning operation.

There are two types of guarantors: limited and unlimited. Limited guarantors will only secure a specified portion of the loan. They are only responsible for repaying their part should you default. Unlimited guarantors will be responsible for the entirety of the loan, including interest and fees, should you default.

If you do decide to take out an unsecured loan with a guarantor, be sure to choose someone who:

  • You know and trust
  • Is financially stable
  • Has a higher credit score or longer credit history
  • You can approach should payment become more difficult

Four Shopping Tips for Personal Loans

#1: Shop around

Never sign on the dotted line the first place you look for a personal loan. Each lender will have a slightly different formula when considering your application, which means your interest rate will vary — perhaps significantly — from one lender to the next. One convenient way to search for an unsecured loan online is by using our loan search tool below which can help match you with the best personal loan for your needs.

Compare Loan Companies and Apply Online
Use our loan comparison tool to view multiple loan options from $500 to $35,000+ with no obligation.
Simply enter you zip code, estimated credit rating, monthly income, and the loan amount you need to instantly view loan companies available to accept your application online right now.

If your credit is great and you’re able to pay off a loan quickly, you might want to consider treating a credit card with a 0% (or otherwise very low) introductory APR as a personal loan. Of course, you’ll need to make sure the credit limit is high enough for your needs. You’ll also need to have the discipline not to add to your balance, and to pay it off before your low interest rate expires, typically in 15 to 18 months. If you think you can swing this, be sure to check out our post on the Best Balance Transfer Credit Cards for some great 0% introductory APR credit cards.

#2: Keep an eye on fees

Make sure you know whether there are fees other than the interest you’ll pay associated with your personal loan. Common fees include an origination fee (typically a percentage of the amount you’re borrowing, which can vary from under 1% to as much as 5%). Also note whether there are fees for late payments ($15 or 5% of your outstanding balance is typical). Other fees may include charges for unsuccessful payments or payments made by check.

Also be on the lookout for prepayment fees. These are fees lenders charge if you pay off your entire loan early (which means the lender won’t be getting the full amount of interest it would have if you had made payments as scheduled for the full loan term). Most lenders I researched won’t hit you with a prepayment penalty for unsecured personal loans, but it’s definitely worth double-checking.

#3: Choose the right term

You’ll want to see how flexible your lender is on loan terms. Some online lenders may only let you choose between three- and five-year terms, for instance. Term is important because it affects how much you ultimately pay over the life of the loan. A longer term can help keep your payments manageable, but it means you’ll be paying more in the end. On the flip side, a shorter term will mean higher payments, but you’ll shell out less overall.

For a more concrete example, let’s say I take out a $10,000 unsecured personal loan at 12% interest. According to this Bankrate calculator, I would pay $11,957 over a three-year term, but $13,347 over a five-year term. If I can afford the higher monthly payment ($332 a month for three years instead of $222 a month for five years), the shorter term means significant savings.

#4: Be careful of scams

There are several unscrupulous lenders who want to scam potential borrowers. Here are a few tips that will help you make sure you’re dealing with a legitimate company:

  • Don’t pay upfront fees. Remember that you should never pay anything simply to apply for a loan. If a potential lender demands payment to evaluate your credit and other financial information, run the other way.
  • You should contact them — not the other way around. If a lender is badgering you, whether through phone calls, mailings, or online, consider that a big red flag. Legitimate lenders simply don’t need to be this aggressive to attract borrowers.
  • Guarantees are bogus. No legitimate lender can promise that they’ll approve your loan application before evaluating your finances. Even payday lenders need proof of income before they’ll make a loan.
  • Verify, verify, verify. Make sure you double-check the lender’s physical address, which should be readily available. Also consider looking them up with the Better Business Bureau or your state banking regulators.
  • You should feel in control. Take your business elsewhere if a lender threatens you in any way, tries to dissuade you from considering competitors’ offers, or tries to get you to borrow more than you owe.

Finding the Best Personal Loans

Compare Loan Companies and Apply Online
Use our loan comparison tool to view multiple loan options from $500 to $35,000+ with no obligation.
Simply enter you zip code, estimated credit rating, monthly income, and the loan amount you need to instantly view loan companies available to accept your application online right now.

Don’t limit your search to either brick-and-mortar or online lenders when you’re searching for the best unsecured personal loans. Online lenders are convenient, but banks and credit unions may offer competitive APRs and more personal service if your credit is good.

On the flip side, you may be able to find an online lender who can offer a better rate if you fit their preferred borrowing profile. Remember to consider potential terms and fees before you sign up for a loan, too — little fees and extra interest can add up in a big way.