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If you are living paycheck to paycheck, you may not have any assets with which to secure a loan. At such times, what you need to look for are No Collateral Loans.
What Are No Collateral Loans?
These are loans based on your ability and willingness to pay. They are typically called personal loans or signature loans.
In contrast, loans that are secured by collateral are also based in part on the value of the collateral. A secured loan or loan with collateral means that the loan is tied to something of tangible value that the lender can repossess and sell to help cover their losses should you fail to pay them on time and in full.
Some examples of loans that involve collateral include:
- Pawning small valuables, such as gold jewelry.
- Title loans.
- Car loans.
- Mortgages.
How Do No Collateral Loans Work?
Because No Collateral Loans are based on ability and willingness to pay, the lender needs information concerning both of those elements. The first part — the ability to pay – will take into consideration both your total income and your obligations, such as rent and other debts. The second part — a willingness to pay – will look at your financial history to see how consistently you pay your bills.
Here are a few examples of No Collateral Loans:
Generally speaking, conservative lenders do not want your combined obligations to exceed 40 percent of your income. This includes both housing costs, such as your rent or mortgage payments, and other debts, such as car payments, credit card debts, and student loans.
What Is Involved In Applying For No Collateral Loans?
In order to apply, you need to be a legal adult. You also need to be either a citizen of the US or a legal resident.
Next, you need to provide identification, such as a military ID card, driver’s license, or state-issued ID card. You also need to provide some financial information showing ability to pay, such as a recent bank statement or pay stub (LES if you are military).
Depending on the size and type of loan, they may run a hard credit check or a soft credit check. Soft credit checks tend to be used for loans involving small amounts of money which you want quickly, such as for a payday loan. Hard checks are reserved for larger commitments and stay on your record for up to two years.
Key Differences Between Secured And Unsecured Loans
The biggest difference between secured and unsecured loans is the presence or absence of collateral. A secured loan requires collateral. If you can’t pay back the loan, then you are forced to surrender the asset that was used as collateral. The lender takes this asset and sells it in order to recoup its losses.
With an unsecured loan, nothing is taken away from you if you can’t make your payments on time because there was no collateral pledged in the first place.
Advantages Of No-Collateral Loans:
- No-collateral loans are often more affordable in the long run.
- By offering consumers the chance to avoid unnecessary complications, they also help reduce any additional stress associated with debt.
- They can be obtained quickly and easily over the Internet.
Disadvantages Of No-Collateral Loans:
- These loans are generally unsecured, which means you can’t get them if you have a poor credit rating. This is due to the fact that lenders aren’t willing to take on any additional risk that will cost them money.
- If you have a poor credit score, it will be hard to find a lender willing to offer you a no-collateral loan.
No collateral loans typically offer you a better shot at securing a larger amount of money compared to if you were to take out a secured loan. Another advantage is that the lender doesn’t take any assets from you as collateral. In addition, there are no additional charges associated with no-collateral loans as opposed to those loans which require collateral as security for the loan.
The downside is that if your credit score is bad, then it will be hard for you to secure this type of loan.
Can You Get An Unsecured Personal Loan With Bad Credit?
The answer is yes. Even though there are no collateral requirements, your credit score will still be key in deciding which loans you are eligible for.
The interest rate for no-collateral loans can also differ from other forms of personal loans. There are three main types of interest rates that are commonly applied to these types of loans: fixed-rate, variable-rate, and fixed-term. The fixed-rate loan tends to be the most expensive option when it comes to the amount borrowed, but it has the advantage of being easy to repay since you don’t have to worry about any fluctuations in rates.
Apply Now For No Collateral Loans at TheGuaranteedLoans
You can apply online right now with TheGuaranteedLoans. We serve as a matching service to help make the loan process as hassle-free as possible.
Have you gathered together a few documents, like ID and a bank statement? If so, you can get started on your application by clicking the button below.
FAQ
If you were to default on a no-collateral loan and fail to pay the full amount back, then the lender can seize your assets. If this happens, you will receive a penny on the dollar for each week that passes.
Since there are no collateral requirements with these types of loans, borrowers are not required to put up any extra money for protection against potential losses. This is why they are commonly referred to as “no collateral” loans. The loan amount is typically calculated in terms of your net worth instead of the value of your assets.
This type of loan can be used in various situations when it comes time for financial planning or when emergencies come up.
Interest rates for unsecured loans are typically higher than for secured loans. For example, credit cards usually have interest rates on the order of 10 percent, while unsecured personal loans usually have interest rates on the order of 15 percent. However, there are many different types of interest rates that can potentially be used with no-collateral loans.
The main thing to look for in terms of interest is whether or not you will be charged a fixed rate or a variable rate. The variable rate is a lot riskier because you never know what it will be from month to month. In contrast, the fixed rate is easier to deal with because you know exactly how much you will have to pay each month.
If you are looking for a no-collateral loan, then you will most likely find them as unsecured. This means that your lender will not take any of your assets as collateral in case you fail to repay the full amount owed on time.
Unsecured personal loans are common if you want to take out a high amount of money quickly at a relatively low cost.