Non-collateral loans are unsecured loans that can be used for multiple purposes. Whether you're looking to start a new business or pay for college tuition, these loans put quick cash in your pocket. And once you've been approved, you can access the cash within 24 hours. But before applying for a non-collateral loan, you need to know how these loans work.
Non-collateral loans are available from banks, credit unions and cash advance lenders. Unlike other types of loans that require collateral, people who apply for non-collateral loans do not have to provide a vehicle title or other security. They can walk into a lender's office, complete and submit an application, and based on the information provided, lenders determine whether the individual is a candidate for a non-collateral loan.
There are two types of non-collateral loans. The first type of loan is available from traditional lenders such as a bank or credit union. Borrowers don't need collateral, but lenders do require an excellent credit history and acceptable income. Persons who can't qualify for a traditional non-collateral loan can contact a payday or cash advance loan company. These non-collateral loans offer easy approvals. However, they also feature high finance fees and short loan terms.
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Non-collateral loans offered by a bank or credit union feature adjustable or fixed rates. Adjustable rates are risky because the interest on the loan can fluctuate on a monthly or annual basis. Hence, loan payments tend to rise and fall. On the other hand, a fixed rate non-collateral loan features non-changing monthly payments, which is better suited for borrowers who prefer predictable payments. If applying for a non-collateral payday loan, borrowers have to repay the money within two weeks, and these loans typically feature finance fees that range from $15 to $30 per every $100.
Non-collateral bank loans benefit borrowers with an excellent credit history and no collateral. These individuals have an impeccable credit history. Thus, lenders are prepared to offer no-collateral loans. To qualify for such loans, the majority of lenders require a minimum credit score between 700 and 750. Individuals who meet this requirement can obtain cash to pay an emergency expense such as a car repair, debt consolidation or home improvement. Non-collateral cash advance loans are beneficial because they're available to persons with bad credit, no credit and no co-signer.
Although non-collateral bank loans are only available to persons with good credit, the interest rate on these loans is higher than collateral-based loans. Yet, the interest is often lower than the average credit card, which is why a non-collateral loan is ideal for debt consolidation. Higher interest rates equal higher monthly payments. Before accepting a non-collateral loan, borrowers have to assess their personal finances and determine whether they can afford a new monthly expense.