No Collateral Signature Loan

A no collateral loan, often called a signature lending program, allows the consumer to borrow money based upon good credit without placing any possessions as collateral or security. Unlike some lending programs, this can be used for virtually any purpose--a vacation, wedding, new car, home improvements, or for consolidating other debt. This lending program is advantageous for non-homeowners and for individuals who need a one-time large sum of money for an immediate need. It typically requires less paperwork than a conventional loan and approval times are faster. No collateral loans vary widely in amounts, ranging anywhere from $500-$250,000, but more typical amounts are $1000-$3000, repayable on a monthly basis within a maximum of 3-5 years. The amount that can be borrowed depends on the individuals credit history and current earnings. "But my God shall supply all your need according to his riches in glory by Christ Jesus" (Philippians 4:19).

Since lenders carry more risk with a no collateral loan, not everyone can qualify for one. If the consumer has bad credit, it will be more difficult to qualify since the bank has no guaranteed property or assets to repossess should the consumer default. Also, due to the increased risks banks carry with these no collateral loans, they tend to be for much less money and offer a shorter repayment periods than a secured property loan such as a mortgage on a home. Also, the interest rates are much higher than with secured programs, typically 12-22%.

When applying for a lending program based on signature and not security, banks will ask to see current employment information, such as a pay stub, and will run a credit report. The amount the individual is awarded is based upon their earnings potential and credit history. With good credit, a bank may offer up to four times the monthly salary for a year, but policies vary from bank to bank. As with all assistance programs, it is in the individuals best interest to shop around to find the best rate and terms offered by different banks and lenders. Rates for no collateral loans can be fixed or variable and some lenders include prepayment penalties in the terms of the loan.

Even though banks do not require property collateral for a no collateral loan, defaulting on monthly repayments is not without its consequences. Penalties and fees for late or missed payments can be significant. Furthermore, a bank can pursue the borrower legally. Courts may order the confiscation of possessions to help repay the debt so borrowers should feel comfortable with their ability to repay the obligation prior to its acceptance. No collateral loans can provide the assistance the consumer has been seeking for home repairs, bill consolidation, or a dream vacation. These are ideal for individuals with good credit who want fast and easy approval on funding for their personal financial needs.

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