A bad credit history leaves few options for a person who needs to borrow money, and it is tempting to apply for a guaranteed unsecured loan. However, a lender offering a guaranteed approval bears some scrutiny. Borrowers may get stung by high interest rates, late payment penalties, or a thinly disguised attempt to grab their information to farm out to the industry.
Unsecured and Legit
Unsecured loans are not new or unusual, and imply that the applicant needs no collateral to secure the cash. To qualify, individuals fill out a short application with basic personal and salary information. In most cases these are short term loans, and are due within 14-30 days.
Payday lending businesses are a prime example of this. Before diving into some quick cash, consider the average interest rate is over 25%, and will recur if the note is not paid back by the due date. Although some states have regulations on the payday lending industry, the borrower will want to approach this resource with caution.
Keep in mind, even payday loans have some restrictions. Many will not accept applicants who do not earn the minimum required monthly salary, or those who have a bankruptcy or negative banking history. On the whole, credit checks are ignored, but ChexSystems reports are ordered. This report will reveal any and all banking history, good or bad.
Know the Lender
Seek legitimate resources when looking for a personal loan. Try a traditional bank and if this fails, apply at a credit union. Credit unions require a minimal amount of money to start an account, but this is all it takes to become a member with full access to discounted services. For people who can not qualify with these institutions, tread carefully.
Even for a small amount of quick cash, do some research on the company, particularly if applying online. There are numerous websites which collect information and farm it out to their ‘network’ of lenders to have it filled. Unfortunately, the applicant has no way of knowing who is receiving these details; it is simply circulating in the ether. To avoid a problem, check the reputation of the business against the Better Business Bureau.
If no issues turn up, make sure a live person can be contacted by phone and e-mail. A legitimate business will make someone available to answer customer questions using both forms of communication. Have them confirm they are a direct lender and not a broker shopping for the best deal. When shopping online, make sure the company discloses all borrower responsibilities on their website; if the interest rate or flat rate fees and terms can not be located, move on.
An unsecured note is often a last resort for a person who needs a small sum of cash to get through to their next pay check. However, a micro-loan can become a problem if left unpaid, becoming an additional bill or negative mark on a credit report. Perform careful research on the company before agreeing to their terms, and if a guarantee seems to good to be true, continue to investigate.
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