No Collateral Loan
For most traditional loans, you need to offer the lender
collateral to back it up. For example, with a home loan,
the house is the collateral. If you happen to default
on the loan, the lender will take the house and sell
it to recoup their losses. Requiring collateral can
help protect the lender from losing money on any loans
they approve. In turn, it often allows them to offer
lower interest rates because the stakes are relatively
low. But in some cases, a no collateral loan is an option.
Those with excellent credit can qualify for a no collateral
loan from a bank. Because they have such great credit,
the bank can trust that the borrower will repay the
loan as scheduled. These are also known as "Signature"
loans, in that the borrower's signature is required.
If they default on the loan, the bank can still sue
them and pursue their assets to pay the loan. Businesses
with great credit who can generate substantial profits,
or who demonstrate exceptional management skills can
also be approved for a no collateral loan. A business
who receives a no collateral loan can also receive a
boost in credit from their suppliers, due to the bank's
confidence in their financial well-being.
Other types of no collateral loans include paycheck
loans. These are short-term loans that can supply
instant cash in an emergency. For this type of loan,
you simply need to prove that you are employed, and
submit your monthly income information. Other examples
of unsecured debt are credit cards and school loans.
Cover Your Assets with a No Collateral Loan
Why pledge your valuable assets if you don't have to?
One of the benefits of establishing a great credit history
is that your signature can qualify you for a no collateral
loan. Whether it's for personal use or for your business,
a no collateral loan can enhance your credit standing
and your reputation.