Understanding the Unsecured Loan Process
An unsecured loan is a type of loan that does not require any collateral and is granted based on the borrower’s ability and promise to repay the loan. Depending on personal credit, unsecured loans may have higher interest rates than secured loans, but this is not always the case. Examples of unsecured loans include credit cards, student loans, and personal loans for things like weddings, home remodels, appliance purchases, vehicles, business start-ups or purchases and more. If you are thinking about getting an unsecured loan for any of these reasons, it’s important to understand unsecured loan criteria so you can increase your chances of getting the money you need. It would also be a good idea to review the unsecured loan process beforehand. Unsecured Funding Source (UFS) is here to help, and we’ll be going over the unsecured loan criteria, so you know what to do to improve your chances of getting a loan.
Unsecured Loan Qualifying Criteria
There are three important unsecured loan criteria to consider – credit, debt-to-income ratio, and bank account transactions.
For most lenders, your credit score will be the key factor in their loan decision. Higher credit scores (720+) will allow one to get the lowest unsecured loan rates and the highest loan amounts. Those with bad credit will be offered higher interest rates, or may be declined. However, just because one lender doesn’t approve your loan because of a low credit score, that does not mean all lenders will.
The second most important unsecured loan criteria is your debt-to-income ratio. Often abbreviated to DTI, it refers to the relationship between your debt payments and income over the course of a month. It is calculated by dividing debt payments by income and then multiplying that total by 100 to get a percentage. Read more about DTI and how to calculate yours here! Unsecured lenders typically look for you to have a debt-to-income ratio of less than 36%.
The unsecured loan process can sometimes involve a lender looking through your bank account to see the money you have coming in and going out. This helps them understand how a potential loan payment would fit into your budget, but is not standard.
Benefits of Unsecured Loans
For most, the main benefit of unsecured loans is the fact that they do not require collateral. This allows borrowers to get the money they need without risking important assets. The unsecured loan process is also very flexible and typically fast, usually not requiring any business financials or other documentation for business owners. Additionally, unsecured loans offer borrowers more flexibility with how they use their loan.
The Unsecured Loan Process At UFS
Once you apply for an unsecured loan, you may be wondering what’s going on behind the scenes while awaiting your approval. When you apply for an unsecured loan with UFS, here is what that process typically looks like for applicants:
- An unsecured loan application or inquiry is submitted by the client.
- An UFS Loan Advisor is assigned and reaches out to them to schedule a consultation.
- With permission, the client’s credit will be pulled at this point (this is a “soft pull,” which has no impact on credit score)
- UFS underwriting department review and issue a prequalification based upon the credit report and UFS’s underwriting.
- With agreement to move forward, the client is then matched with the best banks and lenders for their situation
- Lenders begin to present offers to the client, which can be accepted or denied / countered.
- Once an offer from a lender or bank is accepted, the funds will go directly into the client’s bank account.
Now that you understand important unsecured loan criteria and the unsecured loan process, are you ready to apply? If you’re serious about securing funding, let the experts at Unsecured Funding Source help you out. We typically offer options to borrow up to 450K with interest rates starting below 6%. Contact us to get started!