Unsecured Loans and Types

by admin on April 10, 2014

Unsecured loans come in different varieties, including personal, auto, and bad credit loans in Canada. They are offered by different financial establishments, including banks, credit unions, savings and loan associations, and others. Loans are reserved for creditworthy customers with solid income.

Customers apply for loans to purchase big-ticket items, pay unexpected expenses, or fund home renovation projects. Consumers who need funds to finance the purchase of a vehicle, be it a car, van, or boat, apply for personal loans. The interest rate and term depends on the loan amount, vehicle to be purchased, amount offered as a down payment, and other factors. Banks also offer loans to full- and part-time students enrolled in accredited institutions. Loans under different government programs come in different varieties, including maintenance and tuition fee loans. A common feature of these loans is the fact that they are not secured against some valuable asset such as jewelry, vehicle tools of trade, or anything else of value. Financial institutions look at factors such as level of indebtedness and credit standing. Borrowers with a history of bankruptcies and defaults are risky candidates.

Online banks, finance companies, and payday lenders offer loans to borrowers with poor and fair credit. Payday lenders offer short-term loans with extremely high rates, ranging from $100 to $3,000. People who need quick cash between paychecks resort to cash advance loans. Payday loans are one option for borrowers who need urgent cash. Borrowers fill in information such as their employer and income when applying for a payday loan. The fact that the interest rate is very high makes payday loans an expensive way to borrow. A cash advance is a short-term solution, and another option is to apply for a secured loan. Secured loans are usually used for large purchases and refurbishment projects.

When applying for an unsecured loan, financial institutions request certain documents and financial information to assess the borrower’s creditworthiness. Other documents include tax statements, residence permits, and an application form. Self-employed individuals may have to present additional documents. Unsecured business loans are also available, and borrowers are asked to enclose their tax returns, recent mortgage notes, and bank statements.

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