Is Signature Loan With Alternative Credit Check Right For You?
When a desperate financial crisis hits, it is often accompanied by the lack of collateral, no guarantor and sometimes loss of a job. These are the times when getting a loan becomes a necessity while at the same time it also becomes tough to get one owing to not meeting the expected qualifications.
It may come as a great relief to you as a borrower to learn that lender may take your word and give you an approval, with no collateral, with no guarantor and absolutely without any credit check. Yes, this is what signature loan, rightly known as character loan is all about in a nutshell. Getting such funds is done in a breeze but knowing about it helps you make a wise financial decision.
What Is A Signature Loan?
In keeping with its features, a signature loan is also called good faith credit. The requirements for obtaining the loan are minimal and very basic. All you have to do is to sign on the dotted lines and promise to honor repayments. This type of loan is offered not only by banks but also by many financial institutions.
Since the loan does not require collateral, the interest rate is higher than in the case of secured loans.
Why Is Signature Loan A Great Choice?
Signature loans make things easier for the borrower. Its unique features include:
- Collateral is not required
- No guarantors
- Flexible repayment terms
- Free to use the funds for any purpose
- No credit can be approved with easy credit check
Why Alternative Credit Check Is Considered An Important Feature for Bad Credit People?
Your credit history reflects the level of your financial management. Banks and private lenders take into account your credit history before sanctioning or denying your loan as, if your credit score is poor, you have missed a few payments and hence not qualified for a loan, at least with them. Hence, credit check will benefit those with bad credit and have collateral to place. Apart from this advantage, alternative credit check process has other too, which include:
- Processing is quick as traditional credit check and associated questions are avoided
- A loan is available within 24 hours and hence you will be able to pay your pending dues thus not attracting fees such as penalty fee and late fee.
One of the easy-to-get loans, Signature loans has its rules, which are:
- Must be citizen of US and above 18 years of age
- Must have a permanent residential address
- Must be employed with minimum of 1000 dollars in salary
- Must have a working bank account
Once you meet the above criteria, you are almost qualified for the loan.
What Are The Risks Involved And How To Manage Them?
Getting a no credit loans and no guarantor is a pleasant experience. But, if you would like to enjoy the same experience till full repayment, you need to know the risks involved in getting such loan.
1) Substantial Interest
The interest rate you will be charged will be higher than the interest rates for secured loan. Since signature loan does not require collateral, the risk of the lender is greater and hence the increase in rate of interest.
To have a reduction in interest rate, you may have a co-signer with a good credit score. It helps to get a lower interest rate. You can also have a lower term, which aids in getting a lower rate of interest thereby saving you money paid as interest.
2) Unfriendly Loan Terms
While a loan without collateral seems a winner, you may want to know if there is a downside to it. There are, and hence knowing them will help you plan in advance.
Since the loan is unsecured, lenders tend to charge you heavily at every lapse you commit. You miss a payment and your debt almost immediately goes to collection.
To avoid such happening, ensure that the payments are honored. It would help to plan a budget and set aside some money towards repayment.
3) Ruined Credit Score
Your credit score is badly hurt if you fail on a payment thus affecting the possibility of getting loans in future. Refinancing can hurt your score as well.
Again, the solution is to keep funds for honoring the monthly payments.
4) Filing for Bankruptcy
It can ruin you or nearly so. Of course, people do come out of bankruptcy, build a good credit score, get loans sanctioned and start all over again and succeed. But, this seems to be a long route with many unnecessary and risky moves. To know what to expect will help you to know how to handle situations.
Hence, it is essential that you are aware that defaulting can lead to severe consequences, to put it straight, bankruptcy. If your loan is secured, your defaulting on the payment will result in seizing of your property. But, in an unsecured loan, collateral is not involved and hence defaulting will make things worse. Though there are possibilities of negotiating to bring about changes in terms, if things get difficult, you may be forced to file for bankruptcy.
Bankruptcy may ease your financial burden by discharging unsecured debts but it is not going to help in the long run when you again look for finance. Getting a loan after bankruptcy involves structured efforts by you to close all your existing debts, improve your credit rating and redo your financial map.
Just like most of the lending options, these loans have its pros and cons. Planning a budget including all expenses and organizing your finance will ensure that you manage repayment with comfortable ease.