Everyone in modern society needs money in order to pay for the creature comforts of everyday living, but sometimes there is not enough money when it is needed. At this point, there are two choices to make: fore go the purchase or borrow the money. Often, the purchase cannot wait, and many people choose to take out a loan.
Most loans will require collateral to be put up. Collateral is something of value offered to the lender which will be taken if the borrower cannot repay the loan. Houses and cars car common forms of collateral used for larger purchases. The downside to a collateral loan is that if it remains unpaid, the lender can repossess the borrower’s car or house.
There is another means of borrowing money without having to put up an asset. This is known as an unsecured loan and the simplest form is the no collateral personal loan. A personal loan is not done through a lending institution, but it is typically informally done between friends or family members. The only form of security for no collateral personal loans is ones signature and word of honor that it will be repaid. Depending upon the closeness of the relationship between the borrower and lender, the time required to repay the loan might be flexible. If a no collateral personal loan remains unpaid for an extended period, the lender has the option of taking the borrower to small claims court to get the money back. Small claims courts typically deal with matters less than $5,000 (USD) , but the maximum amount varies by state. No lawyers are allowed in the courts for small claims, but either party could discuss their case with an attorney prior to the court date.
Besides friends and family, there are some lending institutions which offer no collateral personal loans. These are also known as signature loans and are reserved for those with the highest of credit ratings. It is important to get a credit report before filing for a no collateral personal loan from an institution to verify qualification potential. Those who do not have flawless credit will likely have to put up something for collateral and pay a higher interest rate than those with a perfect credit score.
Getting money for an emergency purchase or an impending gift giving event does not need to be difficult. With the option of no collateral personal loans a home or car does not have to be put in jeopardy in order to get the needed funds. It is important that these loans are repaid in a timely manner to prevent strain between the borrower and lender and a trip to small claims court.