How to Get a Personal Bank Loan with No Collateral

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Some banks offer personal loans without collateral, especially if you have a good credit score. However, if your credit score is low or if you already have a lot of debt, you'll have a tougher time getting an unsecured loan. A loan that isn't secured by collateral often comes with a higher interest rate or a shorter repayment period, since the loan is inherently riskier.

The Right Qualifications

In general, in order to have the most options for an unsecured loan, you'll have to meet high standards. For example, to get the best rates possible, you ideally would have a credit score of at least 700. Many banks still will offer loans to prospective borrowers with a lower credit score, but with higher interest rates attached.

You'll also be asked about your current employment and household income. This helps the bank know if you'll be able to repay the amount of loan that you're taking out. If you're unemployed, you will have a much tougher -- if not impossible -- time finding an unsecured loan.

Finding the Right Bank

Remember, you may have to shop around a bit before you decide which bank you're going to use. Some banks, like Wells Fargo, let you apply for a loan online without ever having to visit a branch. Other banks prefer that you visit in person.

You'll need at least the following when applying for a loan. Check with the bank you're visiting to see if you need to bring anything else:

Things You'll Need

  • Identification, like a drivers license
  • Contact information
  • Identification and contact information for a co-signer if you're using one
  • All sources of current income and employment information. Some banks may require that your provide proof of employment. 
  • How much money you want to take out for a loan and the purpose of the loan.

The Application Process

The application process for banks is fairly simple. You'll either fill out an application online or in person, supplying information about who you are, how much you want, and your current income level. The bank then runs a credit check on you to verify your credit score and check your debt-to-credit ratio. If you match the qualifications, the bank representative will give you a contract to sign that includes the interest rate, how long the loan is for, and any additional terms or fees. Read over the terms carefully. If you agree to the terms, you'll sign the contract and the money will be deposited into your bank account. The deposit is typically not available immediately, but within 3 to 5 days.

Be on the Lookout

When you're reviewing the terms of your loan, you'll want to check for the following pitfalls that might turn a tempting loan into a bad choice. Remember, if you have bad credit, you may need to settle for a few of these negative terms if you really need a loan.

  • Make sure all interest rates are clearly explained and you won't be hit with surprise increases.
  • Check your options for the length of the loan. The longer the term, the smaller your monthly payments. However, longer terms also mean that you end up paying more in interest.
  • Check when the funds are available.
  • Note if there is a borrowing limit or a borrowing minimum. 
  • Ask if the loan can be for any purpose, or if you'll need to use the funds a specific way.
  • Look out for hidden fees. Some loans, for example, will actually charge you a fee if you pay off the loan early.

What to Do If You're Rejected by Banks

Don't despair if the banks you visit all reject you for an unsecured personal loan. You still have other options. For example, peer-to-peer lending is growing in popularity. These companies, such as Prosper or Lending Club, offer unsecured loans at low interest rates for people with good credit. If you have poor credit, your interest rate may be as high as 35 percent or more. Before working with any of these types of services, check their rating with the Better Business Bureau.

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