What documents are required?
Credit is a popular financial product that allows people and businesses to solve their needs and problems now, not when funds become available. The classification of loans is huge: car loans, mortgages, online loans, and others. It all depends on why the money was taken from the bank, who took it, and for how long. But then we will talk about such a type of loan as a consumer loan without collateral, we will discuss the conditions for obtaining it, and we will also highlight the main advantages and disadvantages.
What does “no security” mean?
Everyone knows well that banks and microfinance organizations give money to borrowers not just like that, but with interest. You must pay for this financial service. But if you carefully analyze the credit conditions and compare the same interest rates, it turns out that each loan has completely different conditions. What does it depend on?
It all depends on how risky this type of loan is for the financial institution itself. The bank checks the solvency of the borrower, his credit history, the ability to provide collateral, etc. The institution issuing the product must obtain a guarantee for its return. But everyone knows that anything can happen in life: a company can go bankrupt, an individual can get sick, lose their job, etc. And in this case, the risks of non-return of funds are great.
An unsecured loan is issued to the borrower after confirmation of his solvency
For a better understanding, we will analyze the concept of “secured loan”, and what it means. To protect himself and his money, the lender requires the borrower to either provide collateral or a guarantor. If the loan is secured, for example, a mortgage, where the acquired property is always subject to security, then in the event of a dangerous event, the apartment will be withdrawn from the borrower and sold. The debt will be closed. The situation is similar to a guarantee when the obligations to creditors are not covered by the borrower himself, but by his guarantors who have signed the relevant agreement. Thus, the bank ensured its risks and itself against losses.
But what does an unsecured loan mean? This means that the financial company has confidence in its customer and also considers this type of lending less risky.
Then a completely logical question: who is responsible for such obligations, if there is not even a guarantee? In this case, the responsibility is only the borrower. If you do not repay the debt, there will be judgment and criminal prosecution.
Features of an unsecured loan
Such loans do not have some of the features that are characteristic of loans with collateral. They have their specificity. Specific features of a loan without collateral:
- Small loan amount. As a rule, within such loan programs, clients are given small amounts that can only cover current needs, no more;
- Short term. Since the initial value is not large, then the provision period is not calculated in decades. You may take a few months, you may take a year, no more;
- The possibility of issuing without providing a large package of documents. Since the amounts are small, the risks are also minimal, so the banks are in the position of the customers and make it possible to issue such a financial product only with a passport.
Perhaps this is the peak of the main specific characteristics of such loans. If we are specifically talking about a consumer loan that is not burdened with guarantees and collateral, then it can be given in several forms:
- in the form of a consumer loan without cash. This is the most common form when in a chain of stores a customer ends up buying equipment, furniture, or other material assets at the bank’s expense. He does not receive money in cash, but simply signs an agreement and fulfills obligations in equal parts;
- credit card. An equally common form of use. And if someone thinks that this is not a loan, then he is very mistaken. The principle of operation is similar: you use a limit, pay a minimum monthly installment and at the end of the month you pay the interest for using such a limit;
- cash form. It is not often used in practice, since in most cases the people who organize the service need a large amount of money to solve problems: for treatment, rest, education, etc., so the institution cannot just give money. The bank in this case is insured and requires at least one type of security. If, however, he takes the risk, then he will raise the rate himself. For example, Sberbank issues cash with a guarantee and a pledge at 10-11%, and without it at 14%.
How do you know which type to choose for you? It all depends on the situation. For a modern person, the presence of a credit card is an indispensable attribute, everything else is as needed. But it is better to get, if possible, a consumer loan, instead of cash. For the first type, the fees are lower than for the second.
Credit cards are often issued without collateral.
Where can I get a loan without collateral?
Let’s start with what we note: a loan without financial support can be issued both in a bank and in an MFI. The last option is now quite popular since such organizations operate on the Internet and give money to almost everyone. At least that’s how they position themselves.
On the one hand, the MFI option is suitable for those who want to receive available funds very quickly, without waiting and collecting the necessary documents. But there are many disadvantages of such companies, and the biggest of them is the very high-interest rate.
Please note: MFIs have a rate of 1-2%, but only per day, and not per month or year, as most citizens think.
If you do the math, it turns out that the overpayment percentage can range from 365 to 730% per year. This is a huge amount. Therefore, it is always necessary to compare the possible benefits and risks.
When you should apply for money at MFI:
- when bad credit history;
- when there is no official place of work;
- there are other outstanding loans;
- no match bank requirements are submitted to the borrower;
- there is an operational need.
If you have not fallen into at least one of these situations, then it is better to consider the bank lending option.