Having reviewed the comparative table on the Petruchio website, each visitor will be able to find current offers from credit companies for which the provision of collateral is not required. Without collateral, consumer small and quick loans are most often issued, which fundamentally distinguishes them from a mortgage or car leasing, in which the provision of collateral is required.
From the advantage of unsecured loans, namely the lack of the need to provide a pledged item to a credit institution, their disadvantage also arises – a higher interest rate. Indeed, with collateral lending, the lender insures himself with pledged property. While with unsecured lending there is no such insurance. Thus, the credit companies have no choice but to insure themselves by raising the interest rate, making unsecured loans less profitable for the borrower.
Now consider the main advantages and disadvantages of loans without collateral in more detail.
Pros and cons of loans without collateral
The most important advantages of these loans are:
- Exceptional privacy. Unlike targeted collateral loans, here you will not need to explain to anyone for what purposes you need money. For a credit institution, it will be important only to timely repay the debt in full, and nothing more. With regard to security loans, you will have to inform the bank about each stage of the purchase of a car or apartment. Few people will like it, besides, considering that you will not only have to report every step, but also justify it in detail.
- Efficiency Between submitting a loan application and receiving money into the account, a minimum of time passes. At the same time, unsecured loans are deprived of lengthy approvals and estimates of the value of collateralized property, which also saves a lot of time and effort. As a rule, the provision of credit funds for unsecured loans is carried out on the day of applying for a loan. Only in some very rare cases does the process last for a couple of days. Due to this feature, loans without collateral are some of the most popular in the world, because money is often needed not just urgently, but very urgently.
- High availability. If the client must incur expenses associated with the assessment of collateral, notarization of the contract and other costs, then applying for a loan without collateral, he gets rid of all these points, and the process of obtaining a loan without collateral is simpler and the final cost is less.
As for the shortcomings of loans without collateral, these include:
- High interest rate. Unlike collateral loans, where a credit institution receives property guarantees for the conscientious fulfillment of its obligations by the borrower, it does not have such guarantees when issuing loans without collateral, and therefore the rate on these loans is higher. By increasing the interest rate, the company insures the high risks of non-repayment by the client of credit debt.
- Not the highest loan amounts. The maximum loan amount without collateral is 15 thousand dollars. You can borrow a large amount only on the security of property, there can be no other options. Amounts of 15 thousand dollars may be enough to cover current needs, but if we consider the purchase of a property or the purchase of a new car, this will be clearly not enough, so in such situations it is better to opt for a loan on bail.
It is generally accepted that only real estate or a vehicle should act as collateral, but this is not entirely true. Also, many lending companies accept securities and items, as well as sureties, as collateral. When applying for a housing loan, they often use the special application, thanks to which you can quickly find a profitable loan on conditions that suit the client.
In what situations is an unsecured loan the best solution?
It makes sense to take a loan without collateral when you have a small enough amount of money to accomplish your goals and objectives. In addition, this loan will be a real salvation if the potential borrower does not have the opportunity to pledge property, or if he does not have the desire to risk his property. It is no secret that our life often brings us unpleasant surprises and is unpredictable. If today you have a permanent job and stable earnings, this does not mean that after a couple of weeks or months the situation will not change. Here in such cases it is better to bet on a loan without collateral.