An unsecured personal loan is a sum borrowed without any collateral offered to the lender as a guarantee of repayment. When collateral such as a property or car secures a loan if the borrower defaults the lender recovers their money by selling the collateral. Since unsecured personal loan providers lack the security collateral provides they charge higher interest and penalize loan defaulters and tardy installment payers. People with poor credit ratings find it difficult to get unsecured personal loans.

1. What Determines the Size of an Unsecured Personal Loan?

Each financial institution applies their own lending limits for certain categories of borrowers. As a rule, the size of loan offered varies according to the borrower’s credit rating. The better this rating the less the risk the borrower will default so the lender it more willing to be generous.