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Unsecured Personal Loans

Personal Loan Guide Step 3: Where to Find Unsecured Personal Loans

    Trying to find unsecured personal loans isn't as easy as it might seem. That's because, from a lender's point of view, it is very risky to give them out. When lenders give out unsecured personal loans, they have no reassurance that you'll pay them back. They don't have your house or any other asset to claim as collateral if you don't pay the money back. That lack of assurance causes lenders to be careful before handing over unsecured personal loans. And the lenders who do give them out sometimes charge very high fees and interest rates to protect themselves from loosing money. So, to help you sort through your options and find a good deal when searching for unsecured personal loans, here is a breakdown of the advantages and disadvantages of the different types of unsecured personal loan lenders.

Institutional Lenders

    Institutional lenders include banks, credit unions, savings and loan associations and other financial institutions. They're your best source for unsecured personal loans for several reasons. They have lower fees and lower interest rates than other types of unsecured loans (McLean). Also, they usually have more favorable terms. The downside is that if you have bad credit or a rough financial history, you'll have a hard time convincing a lender to give you a loan. However, if you have good credit or you've improved your financial situation recently, you should look to institutional lenders for unsecured personal loans before you try other sources (Federal Trade Commission).

Credit Card Cash Advances

    If an institutional lender doesn't work for your situation, you can try a cash advance from a credit card. Though not the ideal loan, it is certainly better than a payday loan for several reasons (Federal Trade Commission). Credit card cash advances have lower interest rates and fees than payday loans. They are also easier to obtain than a loan from a bank. The downside to using credit card cash advances for your unsecured personal loans is that they have relatively high interest rates, often higher than the purchase APR for the credit card, and there can be finance charges (Federal Reserve Board). The interest rate can be a percentage of so higher and the fees can be either a flat rate or on a percentage basis. So, be careful when using credit card cash advances, and pay off the balances as soon as possible.

Payday Loans

    Only as a last resort should you consider payday loans when looking for unsecured personal loans. That's because they're very expensive with high interest rates and fees (Federal Trade Commission). The APRs can be in the 700 percent range, which is many times higher than bank loans and credit card cash advances (Manning). However, the money is easier to obtain than the other forms of unsecured personal loans, and you can get it almost instantly. So, if you have no other alternative and get a payday loan, pay it back as soon as possible. If you don't, you run the risk of paying more money than the amount of your original loan.

    When you're looking for unsecured personal loans, always shop around to find the lowest fees and interest rates available. Don't settle for the most convenient form of credit because you may end up paying much more than you should, and don't be discouraged if you're turned down by a few banks. That doesn't mean a different bank won't give you a loan. So, diligently search for the best deal, and make sure you pay unsecured personal loans back as soon as you can to avoid paying extra interest.

The Rest of Our Personal Loan Guide:


Federal Reserve Board. "Choosing a Credit Card." (accessed November 16, 2006).

Federal Trade Commission. "Payday Loans = Costly Cash" (accessed November 16, 2006).

Manning, Robert D. Credit Card Nation: The Consequences of America's Addiction to Credit. (New York: Basic Books, 2000), 121-123.

McLean, Andrew James and Gary W. Eldred. Investing in Real Estate. (New Jersey: John Wiley and Sons, Inc., 2003), 44-45.