Loans without Collateral in the U.S.

Collateral is not only very convenient when it comes to securing a loan; sometimes, it is also a necessity. When you provide collateral, the lender will know that if you default on the loan, they will have something else to grab onto as well – some liquid assets that could be turned into cash.

The problem here is that not everyone has the luxury of bringing collateral in the mix. You may be there on a working visa, you may be an international student looking for a car loan – or you may simply be a citizen with no belongings to call your own. In this case, you may have to take advantage of a loan without collateral.

What Is a Collateral on a Loan?

Collateral is a particular high-value asset that the lender accepts as security for a certain loan. This collateral may be anything that is of a higher value – something that, if sold, can cover the size of your loan. However, most of the time, houses, savings accounts, and cars represent the common object of collateral.

If you, as the borrower, default on the loan and your payments, then the lender has the right to seize what you listed as collateral and sell it so that they can recover their losses. That being said, if you make your payments on time, they have no right to touch what you have listed as collateral.

A loan that has been secured by collateral generally comes with a very low interest rate. Since his assets are put on the line, the borrower will be much more motivated to make his payments on time. When there is no collateral involved, he is not worried that his belongings will be taken from him.

Personal Loans without Collateral

The above being said, there are also alternatives for you that do not involve putting your car or house in danger of being seized. You may go for unsecured loans that are not backed or secured by an asset so that you may consolidate a larger debt.

What will matter here more is your creditworthiness – your reliability to pay back the money. If they see that you are not prone to defaulting on your loans, lenders will be more prone to giving you those funds. However, there are a few advantages that you may want to consider – a well as a couple of drawbacks.

Pros and Cons of a Personal Loan without Collateral

As mentioned, loans with no collateral come with a few pros and cons that you may want to learn about. These should be well-researched, so as to avoid any potential problems.

Pros of a Personal Loan without Collateral

There are a few benefits when it comes to unsecured loans – among which are the following.

You may get the loan much faster

With secured loans, the process tends to get dragged down a lot – as there is a lot of paperwork to be gathered (e.g. car titles, house documents, etc.). However, since that kind of documentation is not required for loans with no collateral, you should be able to get the funds much faster.

Your Property is Safe

As opposed to loans that involve collateral, the lender will not be able to seize your property in the event that you stop making payments. Your house, your car, or any asset that you may have listed as collateral will be completely safe from being seized.

You Have Attractive Opportunities

If you have a good credit score, then you may qualify for a fairly low interest rate – one that is similar to that of a secured loan. Since annual percentage rates generally start at 5%, you have all the chances of getting a good loan if your creditworthiness compliments you.

Cons of a Personal Loan without Collateral

Just as there are advantages when it comes to loans without collateral, there are also some disadvantages that you might want to consider. No matter if you are a citizen or a non-US resident looking for a loan, then you might want to consider the following “hiccups.”

You can’t get too much money

When a lender asks for collateral, they know that their investment is safer – and that, in some way or another, they will recover that money. However, when there is no collateral involved, they are completely exposed – putting themselves at great risk. Because of this, the loan may also be much smaller in terms of amounts.

You are still at risk

Don’t think that by getting a no collateral loan you are safe from all dangers if you default. First of all, if that happens, your credit score can get quite a hit – which makes it more difficult for you to get a new loan. Moreover, to recover the cash, the lending company might also sue you – which can cause you to lose quite a lot of money in the long run.

Where to get Loans without Collateral

All things considered, there are several places where you may get an unsecured loan. That being said, the terms may vary – which is why you might want to carefully consider the rates from different options.

Online Lenders

Online lenders are quite a popular option nowadays for getting a loan. Most of them also offer pre-qualification – a stage in which you apply with your necessary information. In these situations, they do a soft credit check on you and within minutes, you should receive an offer.

Credit Unions

Credit unions are also a good way for you to get loans with no collateral. These non-profit financial institutes may offer better rates for those that have low credit scores – with their average APR being somewhere at 18%.

Banks

If you are already in a good relationship with a particular bank, it would be worth to check if they can offer you an unsecured loan. The downside is that they may not allow you to pre-qualify – but the good news is that these loans may come at a better interest rate (particularly if you have a good credit score).

How to Get a Loan without Collateral in the U.S.

When you are in the U.S. on a visa, it might be rather difficult for you to get a loan – particularly since you likely have no assets there, or no one to act as a co-signer for you. However, once you find a good lender, the process should be rather straightforward. Here is what you will have to do.

• Apply: After you submit your application, lenders will analyze your information – and within 24 hours at most, you should receive an offer. Bear in mind that they might ask for extra info – so be prepared for that.
• Get an Offer: Once the information has been verified, you should receive an offer that states the sum you can be given, along with the terms and interest rate. When you sign, the transfer will be initiated and the money will enter your funds within 2-3 business days.
• Pay Up: You’ve been given the money – so, all that is left for you is to start making your payments. You may choose to pay yourself on the appointed day, but nowadays, most online lenders allow for automatic payments.

Wrap Up

Getting a loan without collateral should not be very difficult, as long as you respect the terms of the lender. Ideally, you should have a higher credit score – but you may also find a lenient that will look past your credit history.

Frank Gogol

I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.

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