Did you know that you can take out a loan from the bank for up to $50,000 without any collateral? These types of unsecured personal loans are common and range from $5,000 up to $50,000. The amount you qualify for depends on your income and what you are using the loan for.

The best and most typical reason to take a loan like this is to pay down other forms of high interest debt, particularly credit card debt. If you have about $10,000 of credit card debt at an interest rate of 20% or so, then it would make sense to take out a $10k loan from the bank and immedietly pay off this credit card debt, provided the bank loan is less than 20% (which it generally will be).

The unsecured bank loan works like a car payment. You select a payment term, typically from 36-72 months and make monthly payments until the debt is paid off.

Here are the three major things to keep in mind before applying for a personal bank loan.

1. Calculate how much high interest debt you have and what the interest rate is. This is the target amount of loan you want to get and the interest rate that the loan needs to be lower than. So if you have about $7900 of credit card debt at 18%, aim to get an $8k loan at less than 15% or so.

2. Make sure it is a fixed percentage payment. Don’t get fooled into a low interest rate that is variable because then the interest rate may balloon on you. Generally, these types of loans are fixed APR anyways though.

3. Make sure you make it clear to them that you are using this loan to pay down existing debt. This may make it more likely that they will give you this loan. They’d rather give a loan to someone they view as responsible than someone who’ll just use the money to go on a spending spree.

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