Low interest, unsecured personal loans, also termed signature loans, have some pretty stringent qualifications. These loans are granted without the lender having the benefit of access to collateral or valuable property. Thus, they are also termed unsecured.
No Collateral, Law Suits Ineffective
Home equity loans or automobile loans automatically come with collateral and the lender can seize that property to cover the cost of the loan should the borrower default. Should a borrower default on an unsecured loan, the only recourse the lender has is to file a lawsuit.
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It seems logical that a lender could be awarded some valuable property or a wage garnishment as a result of this legal action, but that is not generally the result. In states or jurisdictions where wage garnishments are permitted, they are often reserved for cases involving child support.
Traditional Lenders and Personal Loans
Underwriting requirements for low interest loans can vary from bank to bank. A borrower approaching a loan officer at a bank where they already have a relationship in terms of various banks accounts, would seem to result in qualification criteria being a bit more lenient.
This is not particularly so. No lender is under any obligation to make available, or reduce criteria for, any loan. Not even a long-time customer. A lender will look closely at existing valuable financial and property assets, job duration, credit history, and debt-to-income ratio.
Especially in the credit crunch endured today, lenders have cut back the size of personal loans so that they are seldom more than $5,000. While some may be willing to offer more, the fact remains that these loans are granted only after the borrower has met some stringent requirements.
Bad Credit Borrowers Beware
If a credit history bears even the slightest smudge, it is often enough to disqualify the borrower in the eyes of a traditional lender. So, many with less than sterling credit histories often turn to one of the countless finance companies that specialize in smaller loans.
But, these lenders offer loan products that bear interest rates up to 10% above traditional lending market rates and must be paid over a 12 to 24 month period. Borrowers interested in such loans would be wise to diligently shop around for alternatives and to compare fees and rates.
Some Alternatives for Personal Loans
Bad credit borrowers may consider cash advance or payday loans. These require no credit check so credit histories are of little, if any, importance. But, these loans are termed high-risk and as a result usually come packaged with high fees and high rates. These are low-value cash loans that are meant to ease short-term cash-flow problems.
Of course, remember that finance companies or lenders vary widely in their flexibility and some are more willing than others to work with folks with poor credit standings. It happens, in certain cases, that borrowers with poor credit may find that they can land a loan for up to $20,000. This money can be spent at the discretion of the borrower.
Do Not Give Up
Indeed, low interest, unsecured personal loans are not easy to come by, but there are lenders available to work with borrowers who have spotty credit records. Research, look around, learn. A loan package to fit your needs is out there somewhere.
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