Some people hear the word “loan” and the first thing that comes to their mind is the bank loan with all the stress, delay and inconvenience that comes with accessing these loans. Apply for a bank loan and the loan officer will tell you must provide security. The good news is that people who want to borrow money have other options. You do not even need security to get a loan if you are dealing with the right company. You can get the classic no security loan from finance companies and firms that offer payday loans. Just understand how the system works and you can always get cash when you need it.
Understanding the No Security Loan
First off, this loan does not require any form of collateral. To qualify for this loan, you should be a business owner or a salary earner. It follows that your monthly income is your security. You have a salary at the end of the month but you need money before the next pay day. The loan company will make the cash available to you on the understanding that you will repay the loan when you get your salary. This is the classic no security loan in its most simple form.
It Is a Short Term Loan
Unlike the conventional bank loan, this one is usually a short term loan. The tenure can be 30 days, 60 days, 90 days or 180 days. In some cases, the lender may give you up to one year (12 months) to repay the loan. Sometimes, you have an option to repay the loan before the repayment date. This option makes sense if you some extra cash. Early repayment also saves you money because it reduces the interest rate.
Interest Rates Are Relatively High
The interest rate on the short term loan is relatively high. This is understandable because you are expected to repay the loan within a short time so the high interest rate should not be a problem. For instance, you borrow $500 at 5% interest rate per month. If you repay the loan within the stipulated 30-day period, you will pay back a total of $525. Now, this is a small price to pay for the immediate cash you received from the lender.
Timely Payment is Vital
When the take the short term loan, you should repay the loan without delay. This will build your credit rating and this means you qualify for more loans in future. The no collateral loan is an excellent idea. Use it well and you will not have any regrets at the end of the day.