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An unsecured loan is a type of loan where the bank does not require collateral when issuing the borrower money. This type of transaction will be based entirely on the merits of your credit report and credit history.
Banks are very leery about issuing unsecured loans in this type of economy. Even with superb credit, you may find yourself paying a higher interest rate than with a loan that is backed by collateral.
The higher interest rate should not scare you though, especially if the loan is used to pay off other debt. Most credit card debt has very high interest rates and the money you save by comparison will be significant. Credit card interest rates can go as high as 35%, your average unsecured loan is 10% or under.
Before you try to qualify for an unsecured loan you should review your credit report. Most credit reports contain one or more errors within them. Between the three credit bureaus there could be several discrepancies. By cleaning up your credit report prior to applying you raise your chances of acquiring an unsecured loan. Cleaning up your credit report could take between 30 and 60 days to accomplish.
Another requirement you must meet to receive an unsecured loan is employment. You must have a good employment history, with the same employer, for a minimum of two years. It will be very hard to get an unsecured loan with an employment history of less than this amount.
Due to the many changes that have taken place over the last year, there may be new requirements to obtaining an unsecured loan. Each bank will have its own qualifications that must be met. Many will find that applying to a credit union will be much easier than going through a conventional bank. Credit unions also offer lower interest rates than banks on many of their loan programs.
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