Log In Log In Log In Apply now Apply now for a personal loan

What is an unsecured personal loan?

Back to financial educationCredit & debt, Loans

If a personal loan is unsecured, what does that mean? Don’t worry, it’s not a bad thing. Unsecured just means that the lender doesn’t require you to put up collateral. In other words, you aren’t committing to give the lender something of value if you don’t complete payments on your loan. A lender takes on more risk by issuing unsecured loans—if you don’t repay the loan, they lose money—so they may charge higher rates or have stricter repayment terms on their unsecured loans.  

What is collateral?

Collateral is something of value that you agree to give your lender if you fail to make your payments on time. With an auto loan, the collateral is usually your car. With a mortgage, the collateral is typically your home.

Secured loans require collateral. Unsecured loans do not. It’s as simple as that. This article looks at a few ways you can use an unsecured personal loan, and what to do if your loan application is turned down. 

Here’s what we’re going to cover: 

  • What can personal unsecured loans be used for? 
  • How do I apply for an unsecured personal loan? 
  • What if my application is turned down?
  • Oportun: Affordable lending options designed with you in mind
Key takeaways: Unsecured personal loans 

  • Unsecured personal loans do not require collateral.
  • Unsecured loans can be used for a variety of personal expenses, from home and car repairs, rental deposits, and more.
  • If a low credit score or a limited credit history keeps you from qualifying for an unsecured loan, you may still be able to get a secured loan.

What can personal unsecured loans be used for?

Unsecured personal loans may be used to cover a wide variety of expenses. Here are a few of the things you might pay for with a personal loan. 

Home improvements

Unsecured personal loans are a great way to finance home repairs and modifications. You can replace a leaky roof, buy appliances, or install new plumbing without having to wait until you’ve saved up enough money.  

Car repairs

Auto repairs can be expensive, and they often come when you least expect them. 

If you don’t have the money for new brakes, a new transmission, or whatever else your vehicle needs, a personal loan can help keep you on the road. 

Rental deposits

Planning on moving to a new home? Many rental properties require a large security deposit. If this is out of your financial reach, a personal loan may be the answer.   


We all need a break sometimes. If your ideal vacation comes with too high a price tag, you might consider taking out a personal loan so you and your family can enjoy a getaway now and pay for it later. 

Unexpected expenses

Life is uncertain. No one knows what will come next—or when they’ll need cash quickly. Knowing you can borrow money to cover emergencies gives you peace of mind for the future.  

Even with all these uses, there are some limits to what a personal loan may be used for. For example, you cannot use the money from a personal loan to pay for business expenses or college tuition. 

How do I apply for an unsecured personal loan? 

Borrowing money is a big decision. Before you take out a loan, you’ll want to carefully consider your ability to pay it back. 

The process for getting a loan is fairly simple. When you apply for a personal loan, most lenders will require you to submit proof of your identity, physical address, and income. They may also ask how much you spend each month, what your other debts are, and how you plan to use the loan. You will probably have to authorize a hard inquiry into your credit. 

What if my application is turned down?

If your loan application isn’t approved, it may be because you have a low credit score or a limited credit history.   

What are credit score and credit history?

Your credit score is a number between 300 and 850 that gives businesses an idea of how likely you are to make payments on time.  The higher the number, the better your credit score.

Your credit history contains information about your credit activity, including what credit accounts you have open, what balances you owe, and your payment history. 

If you’ve been turned down for a loan, you could try applying to a lender with more flexible requirements.  

Another alternative is to apply for a secured loan. This requires you to put up collateral, which makes the loan less risky for the lender. You may also be able to get a larger loan amount or more favorable conditions with a secured loan. 

Oportun: Affordable lending options designed with you in mind

Now that you understand what an unsecured personal loan is, you can learn about how Oportun may be able to help you if you’re looking for affordable credit options. Visit our homepage to learn about:  

  • Personal loans 
  • Secured personal loans 
  • Credit cards 
  • And more!



    Experian. What is an unsecured personal loan? 

    Experian. What can a personal loan be used for? 

    CNBC. Personal loans can be used for almost anything—here are expenses they can’t cover 

    Investopedia. How to apply for a personal loan 

    Bankrate. How do secured loans work? 

    Ready to build a better future? Apply now.

    Personal loans

    You might also like

    How long does it take to build credit? How to improve your credit score What is an APR and how does an APR work? Building an emergency fund How to plan for retirement What is a loan origination fee? How to refinance your credit card debt Is no credit score better than low credit? Paying off debt: The avalanche method

    Ready to build a better future? Apply now.

    Personal loans Savings

    We use cookies to bring you the best experience on our site. We never sell your information to third parties. When you use our site, you agree to our cookies policy. Find out more.