We have all heard about fast loans and online loans; those that need no guarantee and that you get almost overnight. Sometimes they can be a good alternative if you need extra money; for example, to pay for an unforeseen expense. Imagine that the boiler breaks down in the middle of winter; It is an expense that you did not have and a loan without collateral can help you solve the situation.

In this article we tell you everything you need to know about loans without collateral or quick loans. A financial product that can save you at any given time, but which should not be abused.

What is a loan without collateral?

What is a loan without collateral?

A loan without collateral, fast or consumer is a personal credit by which the financial institution puts at the service of the client a certain amount of money. Subsequently, the borrower must pay that same amount plus interest and management expenses to the entity that lends the money.

Since the fast loan does not require a guarantee, it has a high interest rate. Asking for a loan of this type is quite simple. The companies that offer them usually take no more than 24 hours to respond. Many of them, after carefully studying each case, usually carry out an inventory of assets under affidavit. This means that, in case of not returning the loan, the bank could seize said assets.

Requirements to apply for a loan without collateral

Requirements to apply for a loan without collateral

When requesting a loan from a bank, it will verify the solvency of your potential client. Therefore, to determine whether or not to grant a loan without collateral, any financier will ask you to:

  • Be of age.
  • Be solvent, with income above the amount borrowed, to make sure you can repay the loan.
  • Provide the additional documentation required to study your application.

Risks of requesting a loan without collateral

Risks of requesting a loan without collateral

As we have already mentioned, a loan without collateral, lacking a guarantee will force you to acquire another series of commitments. It is true that a loan of this type is easy to apply for and you do not need to possess any good as collateral or the help of a relative or acquaintance that acts as collateral for the bank. However, in return, you must assume that:

  • The interest rates on a loan without collateral are higher. This is because the financial institution assumes a greater risk of default. That it is easily requested does not imply that it is cheap.
  • The repayment time is shorter than that of a secured loan. This occurs because it is requested for very specific needs and is of a smaller amount. For this reason, it is best to return it as soon as possible and prevent interest from growing exorbitantly.
  • Finally, the amount of the loan, as well as the number of installments and their value are fixed by the financial institution.

Use these loans sparingly

Now that you know the advantages and disadvantages of this type of loan, you will understand that they are a tool that you should use sparingly. It is best to use them only in cases of unforeseen events.

Although it seems an easy and attractive way to get money, repaying a loan without collateral could get complicated if you can’t meet the time and fees. It is necessary to understand that these types of loans are offered by companies that promise easy and fast money, and do business with it. Therefore, if you have any problem to return the credit, they will not be very collaborative.

It is best to use a loan without collateral just in case you need it to face an inevitable payment. In addition, you must be sure that you can return it in full. Otherwise, not paying the fees can lead to a spiral of debts that would cost you a lot to get out of.

Before applying for a loan without collateral, read the conditions very well. Once you have the contract, study it thoroughly before signing it.

What to do before applying for an unsecured loan?

In addition to those mentioned, before requesting a loan without collateral, keep in mind the following considerations:

  • What kind of interest you offer, analyze different market options and choose the one that suits you best.
  • What other expenses it implies. You should consider the commission and management expenses because they will have an impact on the fee that you must return each month.
  • What is the time available to return the loan without collateral and the amount of the monthly fee.