Getting Personal Loans without Collateral: Some Aspects worth Knowing

In today’s economic condition, there are many Americans who are in huge debt and are considered as bad credit borrower because of the recent economic crises. There are many financial problems in their life and for them to secure a personal loan is a big task as no lender is willing to give loan to people who is holding bad credit score with them and that even without collateral.

Collateral is the most important thing in the world of lending money. If a person is ready to pledge collateral against the loan amount then they can get approval for their loans easily from any lender. This is because collateral is a security for lender and protects them if they don’t get money from the borrower. They possess the rights to sell the borrower’s asset to recover the lent money.

If in any of the loans there is no collateral involved then those loans are considered as unsecured loan which is not easy to get because in unsecured loan lenders have to bear all the risk. But still there are some lenders who give unsecured loans to borrowers , no doubt that they charge very high interest rate from them.

Understanding the Unsecured Loans and the problems associated with them

Generally people wonder as to why it is difficult to avail a personal loan without collateral? The answer to this question is simple, lenders don’t lend money to people who are not in a situation to pledge a collateral against the loan amount they want. The lenders are at great risk of losing money because the chances of getting default is more with the people who are holding bad credit score with them. That is why the approval for loan to people with bad credit score is not at all easy.

In case of secured loan in which a borrower agrees to pledge a collateral against the loan amount give an ease to lender that if in case borrower get default then the lender can use the collateral or asset to recover the loan amount. In secured loans, there is almost no risk for lenders to lose their money so they easily give approval to people even if they are holding bad credit score with them.

The main difference between these unsecured and secured personal loans is the interest rate charged by the lenders. This difference can range from 2-4% and depending on the amount of loan taken by the borrower. If a borrower is planning to take a large loan amount then the repayment duration of loan will be high and even the interest rate charged will be low.

Unsecured Loans- Set criteria for them

There is some set of criteria which a borrower has to fulfill to get the approval for unsecured personal loan. In case of unsecured personal loans, the set of criteria gets strict which has to be fulfilled by borrower otherwise they will not get approval for the loan.

There are some basic elements which are the same with every lenders like a borrower should be of at least 18 year old and should have an active bank account. One should also be employed and should have a handsome salary. All these basic things are in the list of criteria of lenders who are dealing with personal loan weather secured or unsecured online.

The reason why an active bank account is needed is just because the transfer of funds is simple through it. It helps both the borrower and the lender. In case of borrowers, the funds are directly transferred to borrowers account within a short time after the submission of the application, when all documents are verified. For the lenders it is easy for them to make a decision as the repayment of loan is directly taken through borrowers account.

Choosing the Right Loan Deal

In case of secured and unsecured personal loan the cost of unsecured loan is high as the interest rate charged is high than interest rate charged in secured loans. All you have to do is find a lender who is offering you the best deal for your unsecured personal loans.

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