Avoiding Unsecured Loans – Advice and Tips

by admin on March 12, 2014

There are different types of unsecured debt, depending on your requirements and bank of choice. Banks consider factors such as creditworthiness, debt to income ratio, income level, payment history, types of credit used, and other factors.

There are other options for borrowers with poor credit and stable income, one being payday lenders. While a credit check is not required, borrowers pay a lot in interest charges. Student loans are offered to full-time and part-time students enrolled in universities and colleges. Banks, credit unions, and governmental agencies offer financing to students. Student loans usually come with a fixed interest rate, and some feature free insurance.

money1Both brick-and-mortar financial institutions and non-bank lenders offer financing. Consumer loans can be used for different purposes, including unexpected expenses or bills, vacations, home improvements and renovations, computers, electronics, and others. Borrowers can choose from conventional and high interest rate loans with shorter repayment terms. A guarantor loan is a form of financing that requires a guarantor. They are usually offered to persons with poor credit or little credit exposure and are considered an alternative to payday lenders.

Auto financing is also offered for new and used vehicles. The type of loan determines whether you apply with a bank or non-bank lender. You may want to check with the manufacturer for rebates before you apply for a loan. Car financing comes with beneficial features such as payment deferral, electronic signature, extended terms, and no prepayment penalties. Financial establishments usually require that borrowers present their tax returns if retired or self-employed and their ID with current address. Try to find a cooperative and fair dealer.

The main benefit of short-term loans is that you pay less in interest charges but the monthly payments are higher. List all outstanding balances, including secured and unsecured loans. They are also interested in whether you are a salaried employee or a self-employed individual. You may want to list additional income sources such as bonuses, commissions, second job, and others. Gifts, retirement plans, employee achievement awards, and health savings accounts are also income sources. Ask your financial institution about acceptable sources of income.

Given that collateral is not required, your payment history is an important factor for banks. Some financial institutions require that you have a current account with them. You must be of the age of majority to qualify for a loan. Obviously, the interest rate is higher because financial institutions take more risk. They are willing to offer lower interest rates if you pledge some valuable item as collateral, but this means that you apply for a secured loan. The amount offered is also lower and the term is shorter.

You are considered a risky borrower if you have a history of late payments, consumer proposals, and other debt relief schemes.

Related Resources:

CanadaBanks.net: Secured and Unsecured Loans

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