Unsecured Loans: What They Are and How to Tell If One Fits
An unsecured loan is a loan with no collateral behind it, so the lender relies on your promise to repay. It fits only if your income covers the payment and the total cost, including fees, works for your budget. Rates depend on the applicant and may be higher than on secured loans.
You may want to borrow without putting your car or home on the line. This guide explains the term, compares it with a secured loan, and gives you a test to run with your own numbers. It also tells you when to skip an unsecured loan and what to do instead.
How is an unsecured loan different from a secured loan?
An unsecured loan has no collateral behind it, and a secured loan does. Most personal loans are unsecured9. The lender relies only on your promise to repay, which is why these loans may carry higher interest rates than secured ones14. With a secured loan, the lender can take the collateral if you cannot repay as agreed14.
Choose unsecured if you do not want to pledge an asset and the payment fits your budget. Lean secured only if you can accept the risk to that asset.
| Question | Unsecured loan | Secured loan |
|---|---|---|
| What backs the loan? | Your promise to repay | Collateral the lender can take if you do not repay as agreed |
| How is it priced and approved? | May carry higher interest rates | Generally easier to qualify for, with lower interest rates |
| What if you default? | No collateral is lost, but the credit impact tends to be major | You can also lose the collateral |
| Best fit | You do not want to pledge an asset | You accept the asset risk for better pricing |
What backs the loan?
- Unsecured loan
- Your promise to repay
- Secured loan
- Collateral the lender can take if you do not repay as agreed
How is it priced and approved?
- Unsecured loan
- May carry higher interest rates
- Secured loan
- Generally easier to qualify for, with lower interest rates
What if you default?
- Unsecured loan
- No collateral is lost, but the credit impact tends to be major
- Secured loan
- You can also lose the collateral
Best fit
- Unsecured loan
- You do not want to pledge an asset
- Secured loan
- You accept the asset risk for better pricing
Compare published lender terms
Published ranges from each provider's official pages, listed alphabetically and not ranked. Some providers are platforms working with partner lenders. The lowest rates can require conditions such as autopay or paying creditors directly, and terms vary by amount and state. Your own rate, amount and fee depend on your application, and approval is not guaranteed. Providers without a confirmed personal loan fee range are left out. Last checked 2026-11-02.
OneMain Financial and Upgrade publish one range across secured and unsecured offers, so the terms for an unsecured loan alone may differ.
| Provider | Published APR | Loan amount | Longest term | Origination fee |
|---|---|---|---|---|
 Best EggView terms → | 6.99% - 35.99% | $2,000 - $50,000 | Up to 60 months | 0.99% - 9.99% |
 DiscoverView terms → | 6.99% - 24.99% | $2,500 - $40,000 | Up to 84 months | 0% |
 Happen BankView terms → | 5.96% - 35.99% | $1,000 - $75,000 | Up to 84 months | 0.00% - 8.00% |
 Happy MoneyView terms → | 8.95% - 35.99% | $5,000 - $50,000 | Up to 84 months | 2% - 12% |
| OneMain FinancialView terms → | 11.99% - 35.99% | $1,500 - $35,000 | Up to 60 months | $25 - $500 flat, or 1% - 10% |
 UpgradeView terms → | 7.74% - 35.99% | $1,000 - $50,000 | Up to 84 months | 1.85% - 9.99% |
Best Egg
- Published APR
- 6.99% - 35.99%
- Loan amount
- $2,000 - $50,000
- Longest term
- Up to 60 months
- Origination fee
- 0.99% - 9.99%
Discover
- Published APR
- 6.99% - 24.99%
- Loan amount
- $2,500 - $40,000
- Longest term
- Up to 84 months
- Origination fee
- 0%
Happen Bank
- Published APR
- 5.96% - 35.99%
- Loan amount
- $1,000 - $75,000
- Longest term
- Up to 84 months
- Origination fee
- 0.00% - 8.00%
Happy Money
- Published APR
- 8.95% - 35.99%
- Loan amount
- $5,000 - $50,000
- Longest term
- Up to 84 months
- Origination fee
- 2% - 12%
OneMain Financial
- Published APR
- 11.99% - 35.99%
- Loan amount
- $1,500 - $35,000
- Longest term
- Up to 60 months
- Origination fee
- $25 - $500 flat, or 1% - 10%
Upgrade
- Published APR
- 7.74% - 35.99%
- Loan amount
- $1,000 - $50,000
- Longest term
- Up to 84 months
- Origination fee
- 1.85% - 9.99%
What should you check before choosing either type?
The comparison above covers collateral and cost. These checks apply whichever type you choose.
Check off actions as you complete them. Your selections stay on this page only.
What are the main types of unsecured loans?
Unsecured borrowing falls into two broad groups: installment loans and revolving loans14. An installment loan is usually repaid in equal payments over a set period, often several years14. A personal loan works this way. A revolving loan lets you keep borrowing up to a pre-approved limit, and your payments vary with the amount you owe14. If you want a fixed payment and an end date, installment is the better fit.
Small installment loans exist too. Some credit unions offer payday alternative loans of up to $2,000 repayable over one to 12 months7.
How do you decide if an unsecured loan fits you?
Run these steps with your own numbers. A yes only holds if the total cost and the monthly payment both fit your budget.
Name the purpose. If your debt comes from spending more than you earn, a consolidation loan probably will not help unless you cut spending or raise income5. Taking new debt to pay old debt may only postpone the problem5. In that case, avoid the loan and use the alternatives below.
Check the basics lenders review. Experian says borrowers typically need a score of at least 580, though criteria vary by lender10. Treat that as a guideline, not a cutoff. Some lenders require annual income of $25,000 per borrower or household, while others set no minimum but still verify income8.
Work out your debt-to-income ratio. Divide your monthly debt payments by your gross monthly income15. Gross means before taxes and other deductions15. Experian calls 36% or less ideal, though some lenders may allow up to 50%11. Limits differ by lender and loan product15.
Decide whether a cosigner or joint applicant helps. A cosigner with good credit may help if your credit is poor or thin10. Cosigning puts the cosigner's finances and creditworthiness at risk18, so ask first.
Prequalify before a full application. Prequalification previews your likely amount, rate and terms without affecting your credit10. It uses a soft inquiry9. Prequalifying does not mean you will qualify when you apply10. A full application typically triggers a hard inquiry8. Experian recommends keeping applications within one 14-day period11, but do not assume several applications will count as one inquiry.
Compare APR and restrictions. APR includes interest plus other loan costs, so it is the easiest way to compare total cost10. Also check use limits. One lender bars use for education after high school and for investments such as securities or cryptocurrency1.
Protect yourself. A real lender can charge an application or appraisal fee12. Legitimate lenders do not promise a loan before you apply12, so treat a fee charged for a promised or guaranteed loan as the warning sign. If the loan will pay off other debts, keep paying those accounts until each payoff is confirmed. Some lenders can pay creditors directly1.
Decide only after reading the offer. You are not required to accept an offer if you dislike the terms10. If you are denied, the lender must give written notice with either the specific reasons or your right to request them16.
What does an unsecured loan cost?
On a $25,000 loan with a 5% fee taken from the proceeds, you receive $23,750 in cash, but you still repay the full loan amount plus interest. APR includes interest and other loan costs or fees10, so compare APR, monthly payment, total repayment and net proceeds separately, rather than adding a fee to the APR. Your rate depends on you. Lenders that use risk-based pricing may charge a higher interest rate to borrowers with lower credit scores7. Advertised ranges are only one lender's range, and an advertised range is not the offer you will necessarily receive. Discover lists APRs from 6.99% to 24.99%2, and Happen Bank lists 5.96% to 35.99%1. Neither range covers the whole market, so ask what rate you would actually get.
Fees change what you receive. Lenders may subtract fees from the loan proceeds before you get the money14. One source puts origination fees in a typical range of 1% to 10% of the loan amount8, but some products fall outside that range, as the lender table shows. Fees can also depend on term. One lender states its fee is at least 4.99% on terms of four years or longer4.
Personal loans typically run from $1,000 to $50,000, and some lenders go smaller or larger11. Discover offers terms from 36 to 84 months2. Check each lender's own amount and term limits before comparing. A longer term may lower your monthly payment, but it can mean paying over a longer period and costing more overall5. If you are at risk of missing payments, a lower payment can still be the safer choice. Compare both options in a loan calculator, and subtract the fee from the cash you receive before you compare.
These hypothetical examples assume fixed monthly payments and no fees, so the APR acts as the interest rate here. They are not offers. Your own APR, fees and payment may differ.
| Loan amount | APR | Term | Monthly payment | Total paid | Total interest |
|---|---|---|---|---|---|
| $25,000 | 9% | 36 months | $795 | $28,620 | $3,620 |
| $25,000 | 9% | 48 months | $622 | $29,862 | $4,862 |
| $25,000 | 16% | 36 months | $879 | $31,641 | $6,641 |
| $25,000 | 16% | 48 months | $709 | $34,008 | $9,008 |
| $25,000 | 25% | 48 months | $829 | $39,789 | $14,789 |
| $50,000 | 9% | 48 months | $1,244 | $59,724 | $9,724 |
$25,000
- APR
- 9%
- Term
- 36 months
- Monthly payment
- $795
- Total paid
- $28,620
- Total interest
- $3,620
$25,000
- APR
- 9%
- Term
- 48 months
- Monthly payment
- $622
- Total paid
- $29,862
- Total interest
- $4,862
$25,000
- APR
- 16%
- Term
- 36 months
- Monthly payment
- $879
- Total paid
- $31,641
- Total interest
- $6,641
$25,000
- APR
- 16%
- Term
- 48 months
- Monthly payment
- $709
- Total paid
- $34,008
- Total interest
- $9,008
$25,000
- APR
- 25%
- Term
- 48 months
- Monthly payment
- $829
- Total paid
- $39,789
- Total interest
- $14,789
$50,000
- APR
- 9%
- Term
- 48 months
- Monthly payment
- $1,244
- Total paid
- $59,724
- Total interest
- $9,724
What happens if you cannot repay an unsecured loan?
If you stop paying, the lender cannot take collateral, but your credit takes the hit. Defaulting on an unsecured loan does not cost you collateral, yet it tends to have a major impact on your credit17. Late payments, combined with more debt than you can afford, can hurt your score9.
The path usually runs like this. If a missed payment is not brought current, the lender will eventually send the account to its collections department or a collection agency17. Once a debt is in collections, the original account may show on your credit history as a charge-off17. The lender may also file a lawsuit to collect payment17. The FTC says debt usually does not go away, but collectors have a limited time to sue6.
Before you borrow, set up autopay when the lender opens the account, because it can help you avoid late or missed payments10. Ask the lender what options it offers if you expect to fall behind, and ask before you miss a payment.
What are the realistic alternatives?
Skip an unsecured loan if the payment would strain your budget or if your debt comes from ongoing overspending5. The better alternative depends on your situation.
Whichever path you take, compare the monthly payment, total repayment and cash received after fees before you commit14.
Check off actions as you complete them. Your selections stay on this page only.
What an origination fee does to the cash you receive
These hypothetical figures show the effect of a fee taken from loan proceeds. They are not offers.
| Loan amount | Fee | Cash received |
|---|---|---|
| $25,000 | 5% | $23,750 |
| $25,000 | 9.99% | $22,503 |
$25,000
- Fee
- 5%
- Cash received
- $23,750
$25,000
- Fee
- 9.99%
- Cash received
- $22,503
Frequently asked questions
Can I get an unsecured loan with bad credit?
Some lenders serving borrowers with bad credit or limited history often have more lenient expectations. Online lenders serving poor-credit borrowers may charge interest up to 36% or higher. Legitimate lenders do not promise approval before you apply, and none offer approval that is certain in advance, so treat any such promise as a warning sign.
Will an unsecured loan hurt or help my credit score?
Applying triggers a hard inquiry, which typically causes a small, temporary decline in your score. On-time payments can help your score over time. Payment history is responsible for about 35% of a FICO Score, so missed payments can undo that benefit.
How fast can I get the money?
Funding time depends on the lender. One lender says as little as 24 hours, and another says as early as the next business day after acceptance. Ask when the clock starts, because verification of your documents may come first.
How do I spot and report a loan scam?
Scammers often ask for payment by cryptocurrency, wire transfer or gift cards, which make money hard to recover. Lenders must register where they do business, so check with your state attorney general or banking regulator. You can report scams at ReportFraud.ftc.gov.
Sources and verification
21 sources
Supporting sources checked by automated review.
- CFPBCFPB: What do i need to know about consolidating my credit card debt Retrieved November 1, 2026consumerfinance.gov
- experian.comExperian: What credit score is needed for a personal loan Retrieved November 1, 2026experian.com
- experian.comExperian: How does a personal loan impact your credit Retrieved November 1, 2026experian.com
- experian.comExperian: How to boost odds of personal loan approval Retrieved November 1, 2026experian.com
- onemainfinancial.comOneMain Financial: Personal loans Retrieved November 2, 2026onemainfinancial.com
- upgrade.comUpgrade: Personal loan what rates are available on personal loans through upgrade Retrieved November 2, 2026upgrade.com
RateNavigate Research Desk uses automated editorial tools; no human expert review is claimed. General educational information, not a personalized loan offer or financial advice.