Wednesday, 28 October, 2020

How A Loan Works Without Security


Borrowing without collateral means that you, as a borrower, do not have to pledge assets as collateral to get the loan application granted. The lender therefore does not have the same security in the sense that they have nothing to seize and sell if you are unable to manage the cost of the loan. As a rule, unsecured loans are consumer loans. With consumer loans, you don’t have to disclose what to spend your money on and are free to choose for yourself.

In most loan conditions, one has to provide collateral in the form of valuable assets such as a house, car, boat or cabin. With unsecured consumer loans, you only have to pass a credit check. Other criteria vary, but it is common to document fixed income and be of a certain age. For most consumer loans, you must be at least 20 years old, but certain loans are also given to eighteen-year-olds for loan amounts up to $ 50,000. You must also count on a discount if your fixed income is less than $ 200,000 a year. If you do not meet one of these requirements, you can still contact a guarantor. With some loan providers you must also show that you have a Norwegian address and have lived in the country for a certain time. With a unsecured loan increases the risk to the lender, who can lose the money if the loan amount is not repaid. Therefore, such loans usually come with higher interest rates than regular loans. The loan providers compensate for the risk of getting better paid.

 

A flexible loan with a long repayment period

flexible loan

It is possible to borrow anything from small sums, down to a thousand dollars, to larger loans, up to $ 350,000 with a repayment plan of up to 15 years. The effective interest rate is usually between 9% and 25%. It may seem a lot, but larger consumer loans usually still have a lower interest rate than credit cards, or other short-term consumer loans, such as SMS loans.

The lender is required to provide effective interest rates and the total cost of borrowing. But be aware that some loan providers are more keen to present the nominal interest rate. Then establishment and billing fees are not included in the bill, so you should be sure that what you are looking at is the effective interest rate, with all expenses included.

 

A consumer loan can be an alternative

consumer loan can be an alternative

If you need money fast and the need cannot be met with the credit card and the related framework conditions there. Maybe you have to cover an unforeseen expense, replace or get something repaired in the house, get something repaired on a house or car or you have to buy a new car. It may also be that one simply will not miss a good deal or have no opportunity to wait until one can afford to go on a well-deserved vacation. Whatever it may be, the key word is temporary need, otherwise unsecured loans are rarely the solution and rather the source of a problem.

At the same time, some loan providers use the term clean-up loan, suggesting that consumer loans can be used to clean up the economy. The idea here is to combine various small loans into a larger loan to ensure better overview and better interest rates.

0 comments on “How A Loan Works Without Security

Leave a Reply

Your email address will not be published. Required fields are marked *