Unsecured Loans In Times Of Need
No matter how careful and dedicated you are with handling your debts, there will be times when you can no longer commit to your loan obligations. Sudden expenses, unemployment, and emergencies – these are just some of the things that might ruin your finances. Sadly, late payments and defaults damage your credit history, and it won’t be long until you realize that you cannot get another loan easily. As much as possible, lenders want to reduce the risks that their business is facing, thus they only accept borrowers who have no records of arrears, foreclosure, defaults, late payments, CCJS, bankruptcy, and the like.
Despite the fact that those who have poor credit remarks are rejected, there are still ways on how they can get a financial assistance; it is not as pleasant as the ones offered to those who have excellent credit though. Nevertheless, these limited options provide the money they need and also gives a chance to fix their credit report.
One is by securing the loan using collateral. Known as secured loans, the borrower is required to pledge any of his assets such as a car, house, stocks, jewelry, gadget, or other valuable items. The property or its title is held by the lender until the loan is fully settled. It won’t be a problem if you know that you can afford the loan and avoid any missed payments.
Secured loans not only increase the chance of bad credit borrowers; it also gives a loan with a bigger amount and a lower interest rate. However, the secured loan provider has the right to repossess the collateral in the event of default.
Meanwhile, there are guarantor loans – or loans that use another person to secure the debt. This means having a cosigner who will vouch for your identification and capability and at the same time, guarantee the loan should you fail to settle it. Unlike secured loans, there is no collateral involved although there will be times when the lender will ask the guarantor to pledge a property against the loan. In case you, the borrower, stopped repaying it, the cosigner will handle the overall loan amount including the additional charges. If the guarantor himself defaulted, he will not only lose his property but also, his collateral will be repossessed.
Both loans mention above gives bad credit borrowers a chance to acquire monetary assistance but in case they’re not comfortable with it, there’s another option left – unsecured loans.
What Are Unsecured Loans?
For many borrowers, an advertisement that says “100% approval, no collateral required” sounds too good to be true. Luckily, such kind of loan exists and is usually referred as unsecured loans. This loan offers a small amount, usually, for borrowers with low credit remark. Since it is unsecured, any property is not required. Rather than using collateral as a security against the loan, the lender will demand a stable source of income, thus being employed is crucial. Otherwise, the loan seeker should provide financial statements that would support his financial capability.
Unsecured loans may be the answer for tenants who have no properties or homeowners who are not comfortable with the idea of pledging their homes; however, it usually comes with a high-interest rate. This is one of the lender’s ways to discourage borrowers who cannot afford the loan. but despite being expensive, many borrowers are tempted to get this kind of loans instead because of the following reasons:
Easy And Private
Unsecured loans can be acquired online; this means there’s no need to get out and visit a physical loan office; no need to carry a plethora of paperwork; no need to talk to different lenders. Most importantly, the borrower can apply discreetly.
Online unsecured loans will demand the borrower to complete a 5-minute application form; usually, it asks for personal and financial details. Once submitted, a decision is quickly released and in case the borrower is approved, the fund is directly transferred to his bank account.
Accessible And Convenient
If you’re working during office hours, getting a loan from banks and traditional lending facilities is a challenge unless you’re willing to take the day off. With unsecured loans online, you can send an application even if you’re working or after the business hours. All you need is a stable Internet connection and a laptop.
If you’re still uncertain about unsecured loans, here some more of its advantages:
- Almost anyone is qualified to get the loan; however, the borrower has to meet the lender’s criteria. One is to provide a stable source of income, therefore you need to be employed before you apply. In some cases, the lender may approve those who are jobless as long as they have an alternative source of funds such as benefits, alimonies, or pension.
- Since there’s no collateral involved, the loan seeker will not risk losing any of the items he values such as a car, phone, house, etc. But this doesn’t mean that you can hide from the loan; in case you defaulted, the lender has the right to take legal actions against you. In addition, your credit report will be badly affected.
- The loan can be acquired on the same day you’ve applied, thus making it a quick solution when you have a sudden bill to settle.
Are There Any Disadvantages?
- Like all kinds of loan, unsecured loans display several cons, and the most obvious one is the expensive interest rate. One way to avoid this is by looking for the right loan provider.
- Some lenders are not lenient and they may only approve your application for unsecured loans when you a high income and/or an excellent credit rating.
- Unsecured loans are often offered as a short-term loan. This means that you need to settle it in as fast as two weeks or after a month, depending on the loan agreement. If you’re not ready to settle the loan, you may pay for additional charges just to extend it. Therefore, before you hit the application button, be sure that you fully understand how unsecured loans work and if you can handle the repayment term.
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