Not everyone has a home, portfolio of shares, or a business that they can pledge and use as collateral to secure a loan. With an unsecured loan, it is still possible to finance your dreams. Whether that be the dream car, the dream honeymoon, the dream wedding, or just the holiday that you always wanted needed. Getting a bit of a help with a lump sum injection via an unsecured loan can go a long way to jump starting your luxury lifestyle.
Of course, since there is no asset that you can offer the lender to back up your loan in case of default, the lender will require several proofs of your ability to repay the loan. This includes
- Age (must be over 18)
- Citizenship
- Employment
- Uncommitted Monthly Income (ie. income – tax – expenses)
- Place of residence
- Any guarantors
Factors that can improve your chances of approval for an unsecured income will depend on the stability of your employment (how long you have been employed and with the same employer, whether you’ve ever been unemployed), the amount of your monthly wages, how long you’ve stayed in the same residence, and of course – your credit history.
People with a bad credit record can still get a loan but you will be charged a much higher interest rate than normal. This can be expected because of your higher risk of default and the fact that there is no security offered as collateral. Normally in the case of a secured loan, if the borrow defaults on the loan then the lender can repossess the asset that has been pledged as security for the loan. In the case of a house, the lender can repossess the house or force you to sell it to pay the loan off.
Unsecured loans can be approved for amounts of $5000 to $100,000 dollars, depending on your personal profile, and be offered for 1 to 7 years (some lenders lend up to 10 years in certain situations). Be sure to check with your lender on the terms and conditions of such loans. What are the repayment periods, how much is the setup fees, are there any recurring fees, what are the fines for missing payments, what is the interest rate, etc?
Interest rates on unsecured loans are higher than normal, so one of the best ways to improve and lower your rate is to shop around. Comparing different loan types offered by different lenders can be easily down via a lending broker or even more conveniently via comparison sites online. Special websites have been set up to list a large selection of lenders and the interest rates, terms & conditions, and features offered. By having all the lenders and their unsecured loan products listed side by side, it is easier to compare and nail down the lender that best suits your needs.
As with all loans, always take the time to read the fine print, make sure you known exactly what you are signing up for, and be sure of what the exit conditions are for when you want to pay off the loan early.