PaydayNow: Is it Safe to Take Out Unsecured Loans?

Unsecured loans from a trustworthy lender are entirely risk-free. Making on-time payments helps to protect your credit. Unsecured loans are safe if they come from a bank, credit union, or trustworthy online lender who analyzes your credit, fully explains the loan’s charges and terms, and takes steps to ensure the loan won’t put you in financial distress.

The dangers concern your ability to repay the loan as well as the impact on your credit. Unsecured loans are so termed because they don’t require collateral; if you don’t pay, instead of losing your home or car, your credit score will plummet, making it more difficult for you to qualify for low-interest credit in the future.

Compare unsecured loans from various lenders to locate one with affordable monthly payments that will help you maintain your credit and money. If you borrow from a respectable lender, simply taking the loan will not harm your credit. Then it’s up to you to pay it back on schedule and keep your credit in good standing.

Obtaining a risk-free unsecured loan

Knowing the warning signs of predatory lending will help you find a secure loan and avoid becoming trapped in debt. In general, reputable lenders:

Evaluate your ability to pay back the loan. 

Your credit, income, and debts should all be checked by a lender to guarantee that you can repay the loan. 

Identify their annual percentage rates 

If your credit shows you’ve had trouble paying loan or credit card payments in the past, a trustworthy lender may exclude you or provide a reduced loan amount. The APR represents the total cost of a loan. You could pay a lot more than you meant to borrow if a lender isn’t upfront about the loan’s APR. Financial professionals and consumer advocates agree that a safe loan should have an APR of 36 percent.

Provide reasonable payback conditions. 

Your loan should be paid back in equal monthly installments, with a portion of each payment applied to the principal. Many reputable lenders have a one-year or two-year minimum repayment duration. Many consumers may find a two-week or even two-month repayment time unreasonable.

Inform credit bureaus about on-time payments. 

Because legal lenders record monthly payments to at least one of the three major credit bureaus: Equifax, Experian, and TransUnion, part of your incentive to repay the loan are to keep your credit.

A personal loan’s monthly installments should fit into your budget without burdening your finances. Check your budget before applying to see how much room you have to repay a loan.

How to obtain an unsecured loan

When you’re ready to apply for a loan, you can pre-qualify with online lenders and select institutions to see their available terms and rates. Pre-qualification has no bearing on your credit score and provides you with an estimate of what you can expect before committing to a lender.  Check Now!

Online lenders, like credit unions, provide some of the finest unsecured loan rates and extras, such as a rate-beat program or unemployment protection. Your credit score will be briefly impacted if you apply for a loan with a respectable lender. The lender performs a hard credit draw to obtain your credit information, which can lower your score by a few points.

Depending on the lender and whether you have all of your application paperwork ready, your loan application could take 20 minutes to an hour. The lender will request your Social Security number, phone number, and employment verification.

Make a plan to use and repay the loan once you’ve got it. Put the money in a simple-to-access account, such as a checking account. Some lenders offer a minor APR reduction to borrowers who set up automated payments, which can help you avoid late fees.

Susan W. Lloyd