This idea has been surpassed by times and a borrower with good credit can easily receive a loan without having to provide any form of security. Personal or the commonly referred unsecured loans are such kinds of loans and will only depend on the credibility of the debtor regarding integrity and ability to pay. Debts and Borrowers go together like bread and butter, and it is for this reason that one needs to make these preparations:
1. Never take the personal loan before another major loan
If you intend on taking a car loan or mortgage, don’t take a personal loan in the preceding 2- 3 months mainly because it is not good for your credit rating. More personal loans result to a lower Debt Servicing Ratio (DSR) which limits the amount you can be issued on the first loan.
2. Shop and make intensive comparison of loans
Bank rates change like a breath of fresh air. At one point a bank or another lender is offering the best deals but within no time they are the worst deals. To ensure you get the best prevailing loan rate, carry out a thorough research to be sure you take home the best deal there is on the market.
3. Pay keen interest on the penalties
No one plans to make a late repayment for a loan, and hence almost everybody does not pay interest on the consequence of making late payments. It is, however, wise to check what you are putting your hands on before committing to the loan.
4. Remember these are only for cash flow, not leverage
Some personal loans don’t have collateral, and since the lenders don’t have security, they will only pile up interests to compensate themselves. This means you should only take a loan for a purpose that will guarantee the banks how and when they expect to be repaid. A personal loan should not be staked in high-risk investments or as leverage. Borrowers must also understand that personal loans without any form of security attracts higher interests rates. In this connection, not all personal loans can be availed without collaterals. Examples of collaterals demanded as loan security by banks include gold, valuable paintings, car, and house.
That said, a personal loan can come in very handy especially because you don’t need any real assets to acquire one. The ease of access may, however, blind people into taking loans they don’t need or cannot afford to fund or for unnecessary reasons. Observing the above notes will help with such situations.