How to Get a Personal Bank Loan with No Collateral

Banks are not the only lenders that make personal loans.

A personal loan is also called an unsecured loan or a signature loan. Banks that make personal loans ordinarily require the borrower to have a strong credit rating and a stable employment history. Most lenders will ask how the loan proceeds will be used before granting an approval. The interest rate for a personal loan is usually higher and the repayment term shorter than a loan secured by collateral because of the risk incurred by the lender. The borrower has the option of accelerating the payments to pay off the loan early, which will reduce the finance charges.

Things You'll Need

• Financial statement
• Tax returns

Instructions

1. 

   Gather your financial records.

   Prepare your personal and financial information for the bank loan officer, including two years of tax returns and a current financial statement. Have any additional borrower or co-signer gather his or her information to avoid any delays in the application process. Verify the accuracy of the records before applying for the personal loan and make copies for the lender.

2. 

   Meet with the lender to obtain information about a personal loan.

   Call a bank lender and arrange a meeting to discuss a personal loan. Tell the loan officer the purpose of the call and request a zero collateral loan. Make sure any additional signer goes to the meeting and then complete an individual or joint credit application as instructed by the lender.

3. 

   Avoid using a lender that charges an excessive loan rate.

   Find out what loan structure the loan officer is offering on the unsecured loan if your application is approved. Negotiate both the interest rate and the term of the loan until the payment is manageable. Reject an offer that has an interest rate you think is too high or a loan term that makes the payment unaffordable.

4. 

   Research personal loan lenders.

   Compare other signature loan sources such as a credit union before you settle on a lender, to see what interest rates are available. Check both locally and online and narrow the choices down to the best two institutions. Apply with both lenders and give a local loan officer all of the pertinent financial information, or scan and upload the documents if using an online lender.

5. 

   Close on the loan.

   Review the different approvals you receive and decide which lender offers the best loan package. Contact the lender to set up a time to sign the loan paperwork and let any additional signer know to be present at the closing. Call the loan officer you are not using and thank him or her for considering your loan request.

Tips & Warnings

• Ask the lender if the rate can be reduced by having a bank account automatically charged for the monthly payment.

• Pay extra each month to decrease the total finance charges.

• Refinance the loan at a lower rate if collateral becomes available.

• Avoid using an online lender you have never heard of before.

• Do not sign any loan documents without reading fine print.

References

• Smart Money: Personal Loans Stage a Comeback
• Bank Rate: Getting Personal Bank Loans

Resources

• Federal Trade Commission: Credit Cards & Consumer Loans