Are unsecured loans safe?
To ensure a safe loan, you should borrow from a bank, credit union, or online lender who will thoroughly review your loan in person, reviewing all the costs and terms of the loan to ensure it won’t overwhelm and affect your finances.
Unsecured loans are so named because they don’t require collateral; if you default on your loan, instead of losing something like your home or car, you’ll just lose your credit score, which could make it harder to get low-interest credit in the future.
Compare unsecured loans from multiple lenders to find one with a monthly payment that fits your budget, so you can protect your credit and your finances.
If you are borrowing from a reputable lender, simply getting a loan will not hurt your credit history much. This way, you can repay it on time and maintain a good credit history.
How to find a safe personal loan.
Knowing the signs of predatory lending can help you find a safe loan and avoid falling into a debt trap. Legitimate lenders often exhibit the following signs:
- Assess your ability to repay the loan first. Lenders should check your credit history, income, and debts to make sure you won’t have trouble repaying the loan. If your credit history shows that you’ve had trouble paying off a loan or credit card in the past, a reputable lender will likely deny you a loan or offer you a smaller loan.
- Be transparent about their annual percentage rate. The APR represents the full cost of a loan. If a lender isn’t transparent about the APR of the loan, you may end up paying more than you intend to borrow. Financial experts and consumer advocates say 36% is the highest APR a safe loan should have.
- Offer reasonable repayment terms. Your personal loan should be divided into equal monthly payments, with a portion of each payment going toward the principal of the loan. Many reputable lenders have a minimum repayment period of one or two years. A two-week or even two-month repayment period may not be fair to many consumers.