Understanding an unsecured personal loan inside out

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What is a personal loan?

An unsecured personal loan, also called a signature loan, is a lump sum loan amount given to a qualified borrower. This type of a fixed loan is not secured by a residential property or a collateral. A personal loan allows you to borrow money to pay off any high-interest debt, fund a significant big ticket purchase, cover any unexpected needs, or for any home improvement project such as adding more square footage, renovating an existing living space or room, or expanding a home by moving walls. Finding the best unsecured personal loan for your needs, especially if you can acquire a personal loan with a low interest rate, might save you thousands of dollars if you have a good credit score and a stable income.

Prerequisites for sanctioning personal loans


18 or above

Credit History

Record of timely repayments in the past


Legal US resident

Employment History

A permanent job with a steady source of income

Bank Account

Verifiable account with a reputed bank

Monthly Debts

A low debt-to-income ratio -- usually, below 35%

Credit Score

620 or higher (300-575: Poor, 580-669: Fair, 670-739: Good,740-799: Very good, 800-850: Exceptional)

When should you go for a personal loan?

How much can I borrow for a home improvement loan?

The maximum amount you can borrow to update your home is about 90% of the market value of the property.

Most home improvement loans are between $1,000 and $100,000. And the interest rates range from just under 6% to around 36% (the higher end is for those with a bad credit score). The loan terms for repayment usually range from 10 to 30 years.

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What are the key features of personal loans?

  • Loan Amount & Tenure
    The amount of this unsecured personal loan can vary between $1,000 and $100,000. The term or length of the unsecured personal loan ranges from 24 months to 72 months.
  • Fixed Interest Rate
    A personal loan comes with fixed interest rates/ annual percentage rates, and fixed monthly installments with full principal and interest amount.
  • Early Termination Fee
    It might come with an early termination fee in the first 12 months and usually offers a limited repository of lenders.

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Do a quick comparison of different types of home improvement loan options and find the best loan for your financial needs

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Learn about the different types of home improvement loan options and choose the loan that best fits your financial needs


Pros and cons of an unsecured personal loan

The pros

  • Simple and quick loan application process.
  • No requirement for any collateral.
  • Fixed interest rate and monthly payments.
  • Lower APRs than credit cards for borrowers with a strong credit score.
  • Flexible loan utilization.
  • Good for short-term financing needs.

The cons

  • APRs can be higher than credit cards for borrowers with a low credit score.
  • May have possible fees such as origination fees or late fees — apart from the loan payments.
  • May add considerable debt to your budget in the absence of a good repayment plan.
Choosing the best personal loan lender

When you're planning to apply for a personal loan, you must always get the best quotes from loan lenders around you. It helps to keep the following factors in mind when you're comparing potential loan lenders.

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