Unsecured Loans

Simple facts about unsecured loans:

• What is an unsecured loan?
• Is a pawn loan an unsecured loan?
• What are types of unsecured loans?
• Can I get a unsecured loan with bad credit?
• How much can I borrow unsecured?

What is an unsecured loan?

An unsecured personal loan means you don’t have to put up any collateral to borrow money. But because there is higher risk, you generally pay a higher interest rate. Notwithstanding putting up collateral, a traditional lender will usually want to scrutinise your personal and business (or employment related) financial circumstances. In most cases such a lender offering unsecured loans will take into account your credit-rating, how much money you already owe, your assets and the value of those assets. You may also need to disclose why you need the money … often the need to borrow money could be for very personal and subjective reasons which you might now want to disclose.

The main reasons why banks and other financial institutions won’t loan you money is because:

• Lack of consistent cash flow
• Insufficient collateral
• Debt-to-income ratio
• Customer concentrations
• Insufficient credit score
• Personal guarantees
• Insufficient operating history
• Economic concerns
• Insufficient management team
• Weakening industry

A pawnbroker is not particularly concerned about any of these things because the asset pawned, whether it be a car, motorbike, truck or boat, is held as security by the pawn shop until the loan is paid out.

Is a pawn loan unsecured?

No. A pawn loan is secured by the asset being pawned. For example, if you pawn a car, the pawn shop will hold the car as collateral until the loan and due interest is repaid in full. So, a pawn loan is not an unsecured loan. Nevertheless, it is much less complicated to obtain a pawn loan rather than an unsecured loan from a bank or other financial services lender. Much less paper work and much less scrutiny.

What are types of unsecured loans?

Unsecured loans include personal loans, student loans, and most credit cards—all of which can be revolving or term loans. A revolving loan is a loan that has a credit limit that can be spent, repaid, and spent again. Examples of revolving unsecured loans include credit cards and personal lines of credit.

Can I get a unsecured loan with bad credit?

Can you get an unsecured personal loan with bad credit? Yes, but with a few caveats. … Most likely they are payday loans, which come with short repayment terms and very high interest rates. A high credit score doesn’t guarantee you’ll qualify or get a an unsecured loan at a low rate. If you have bad credit, you may still be able to find a reputable provider for a personal unsecured loan but it will be more difficult.

As a pawnbroker U-Pawn is not particularly interested in credit score because when you pawn an item, you are taking out a loan using your valuable as collateral. The pawnbroker will agree to give you a certain amount of cash and hold your item until you have paid back the loan amount plus interest and fees.

How much can I borrow unsecured?

Typically, unsecured personal and small business loans are for borrowing anywhere from $1,000 to $50,000. When you apply for a unsecured loan, how much you are able to borrow will depend on your credit rating, which lenders will use to help them work out how likely you are to pay the loan back. But that is not all they will look at;

• For example, banks and other traditional lenders will want to assess a borrower’s income and expenses, including as to other loans and living expenses in order to calculate how much money can be put towards loan repayments. In the current market, lenders are looking much harder at borrowers’ expenses by analysing credit card statements, transaction accounts and any recurring spending patterns.
• In the first instance, you’ll most likely be asked to detail expenses like childcare, education, insurances, phone and internet bills, groceries, medical costs, entertainment, recreation, travel and transport. So, if your bank account is filled with Uber Eats orders, overdue Afterpay bills, Netflix subscriptions, take away coffees and smashed avo brunches, perhaps it’s time to tidy up your spending habits.
• A traditional lender will be hesitant to take on a customer who is juggling multiple streams of debt at once. This can include car loans, personal loans, HECS/HELP debt, tax liabilities, credit cards and store cards. Even if your balance on a credit card is nil, the banks still want to know about it. If you’ve missed payments, defaulted on a loan or failed to pay off a mounting credit card bill, this can negatively affect your credit rating and therefore your ability to obtain an unsecured loan; or perhaps even a secured loan.
• Not only do lenders want to know what you owe, they want to know what you own. Assets like property, savings accounts, vehicles, investments and shares, and other household items like boats, tools, furniture and electrical goods can all be included in your loan application. Lenders also like to see secure employment when assessing a loan application. Most lenders won’t approve a loan application if the borrower is still on employment-probation, so ensure you have proof of your employment history. It’s important to have at least six to twelve months in a job, receiving regular income.
• Indeed, it can be daunting to actually tally up your spending, but it can also be incredibly beneficial. Knowing your income and outgoing costs can help you curb unnecessary spending as well as give you a realistic understanding of your financial position.

Obtaining a pawn loan dispenses with all this guff. Essentially to pawn a car for cash requires you only to ‘drive in and walk away with a wad of cash in your pocket’. We might ask if you’re having a good day so far, but that is about the extent of it. (*if you are borrowing a lot of money, we may ask if you are an undischarged bankrupt)

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