In the light of the perceived “credit crunch” these days, it would seem little difficult to obtain a high dollar loan quickly; the most sought after “unsecured” loan is even more difficult to land because the banks and credit companies have imposed severe restrictions on capital disbursements.
You won’t need collateral to get an unsecured loan. Instead, these loans are guaranteed because of the credit rating of a business, or simply an individual’s signature. These loans, also called signature loans, create flexible opportunities for business expansion, personal investment decisions, and credit card openings. Unsecured loans can also be a useful way to generate capital without needing to provide collateral, like real estate or a down payment.
The creation of the loan, then, depends increasingly on the importance of a credit rating. Tom Garimentis, a column writer, writes about unsecured loans and how they normally require no property collateral, but in fact some banks may structure a loan for individuals with “less than perfect” credit rating by negotiating some form of backup. He writes than often times families take out a loan to pay for their living expenses, to relieve some “financial tension”.
He recommends that the ideal path is to first get in touch with the local branch of your main bank and meet the customer service representative to represent your case in person. It is possible that financing of unsecured loans or other unsecured debts would be approved rather quickly and on occasions even a check could be written the very same day!
Tom Garimentis explains that some of these high-interest, unsecured loans are offered mainly to individuals who have poor credit, but they can be used in any form. Many people find the idea of a personal loan to be very appealing. The “things will be better tomorrow” mindset is widespread among such individuals, as they feel they will be able to pay the loans off at some point in the future.
Especially in light of the fact that mortgages have turned from low interest and low payment to higher interest rates and payments, many are finding that actually securing that loan for a home is truly an opportunity. Also, as credit card companies buckle down on requirements to qualify, and are making calls to customers about paying their debts sooner, a personal loan could end up saving you both in interest charges and late fees in the long run.
It is very important for both people and credit rating agencies to check their credit reports for accuracy and thoroughness. You may still be able to get a loan with a bad credit report, but there will be stricter standards. Paying off loans in full and on time will improve bad credit scores.
The trend of living in cities and owning smaller apartments or condos can lead to having a very small physical collateral. Some people rent out their primary residence and may not own a vehicle. In this case, it’s important to remember that credit can be used as a form of collateral. Unsecured lending may become the future of lending.
Bank loan approvals are increasingly affected by a consumer’s credit rating score. Financial columnist Tom Garimentis recently wrote a column describing how many families are taking out short-term, unsecured loans for personal and family necessities as one means of managing personal financial shortfalls. These families often secure loans for bad credit with no collateral at all. However, with the changes in the financial markets, banks are beginning to write loans with collateral requirements on personal loans for consumers with less than exemplary credit ratings. This example demonstrates that using your good credit as collateral is becoming more important as unsecured financing is becoming more widespread.
- Tom Garimentis
This entry was posted on Friday, November 7th, 2008 at 2:11 am and is filed under Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
