Borrowing Without a Collateral: 8 Things to Know About Unsecured Loans

Running any business has its ups and downs. You will encounter financial challenges every once in a while. Unpredictable emergencies that need to be addressed within the shortest time possible. Maybe you need to replace some equipment to allow smooth operation of the business. Or you could be having an unsettled loan that could make you lose your assets if not paid on time. What would you do? Simple, apply for unsecured loans and forget all these problems. Here’s all you need to know about these loans.

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  1. No Collateral Required

Unlike in secured loans where you need to pledge legal property or assets as collaterals, unsecured loans do not require any collateral. So you won’t have to worry about losing your legal property or assets should you default. So, in case you’re having a personal emergency or you need some funds to open or expand your small business, applying for this kind of loan will be much easier. Don’t allow yourself to suffer a financial hiccup just because you have no assets or property to pledge when you can apply for an unsecured loan today. You can check UnsecuredFinanceAustralia.com.au for details.

  1. Less Background Checks

In the case of secured loans, the lender must do thorough checks to determine your credibility which could even include your lifestyle audit. You will also be forced to secure the loan with a collateral, which you’ll risk losing in case you default. But with unsecured loans, your creditworthiness is all that matters to the lenders. And if it’s all good, then what are you waiting for? What if you have no credit score? Again don’t worry, unsecured loans will still be the best way to build your credit score which will increase your loan limits and loan periods. But you must ensure that you pay for the unsecured loan on time.

  1. Real-Time Loans

Perhaps the main reason that you will go for an unsecured loan is that you need some fast cash for your personal use or for the business. And if the loan is to take days for it to be processed, it would cause some inconveniences. You could lose your loyal customers or the good paying contract you might miss because you lack some equipment which is not a good thing. But this is not the case with unsecured loans. The loans are very convenient in that when you apply for the loan, it will be processed within the shortest time possible and you can comfortably sort the financial issue you were facing.

  1. Easy to Apply

Initially, you would be required to go to the lenders and fill multiple pages of papers when applying for the loan. You would then go home and wait for the lender to consider your application contact you if you’re successful. This means you’d go to the bank a couple of times and might not get the loan. But not anymore. The technology is advancing and the lenders are also going digital. A majority of the lenders nowadays have an online presence where you can apply for the loan. All you’ll need to do is to log on to their websites – which are easy to navigate – and you’ll find the online application form. You’ll then fill the form and upload your address proofs, national ID and other necessary details.

  1. Credit Is a Reusable Resource

When you apply for an unsecured business loan, you will be given a set limit by the lender and as long as you will pay for the balance, you can reuse the credit anytime you need to. Despite the fact that the lender will only give you smaller limits because of loan security as compared to secured loans, you can negotiate this limit provided you’ll be willing to meet the additional terms. One main advantage of this option is that it will eliminate the hang-ups usually experienced with cash advances and traditional loans. So you won’t have to stress yourself again about constantly re-applying for funding.

  1. Reasonable Loan Term

The length of the loan you will apply (if awarded) will be used to determine the amount you’ll be paying on a regular basis. If the loan life is longer, the repayments will be lower. Unsecured loans are known for their short-term characteristic. “Isn’t this a disadvantage?” Well, yes you may not be allowed to extend the loan duration to, say 10 years. But to your advantage, you’ll be out of the financial obligation within a very short time and relieve yourself the loan repayment pressure. But of course, this will be so only if you pay for the loan on time. Defaulting will attract more fees and this will mean you’ll have to pay way more and for a longer period also.

  1. Flexible Loans

The amount you’ll get in the case of unsecured loans is significantly less than that of secured loans. But this doesn’t mean you won’t get enough loan for your business or personal emergency. If you have a good credit score, then you will qualify for a much higher loan amount. And the more the amount you take, the lesser and more affordable are the rates charged. And this will be to your advantage, especially if you’re taking the loan to start or expand your small business. You will also appreciate the flexibility in the repayment of the loan.

  1. There are Associated Fees

The unsecured loan that you’ll be awarded will have different ranges of the fees associated with it. You should ensure that you’ve considered all the fees before deciding on the loan amount and loan term to go for. Common fees associated with the loans include early payment, withdrawal fees, servicing fee, insurance, establishment fee, and early exit fee. Establishment fee is charged to your account at the commencement of the loan when it is deposited into your account. Early repayment fee applies if you decide to pay off the loan sooner than the agreed time.

Conclusion

It is very important to understand the essential facts of unsecured loans before going for it. And lucky for you, all the information you need to know about unsecured loans have been clearly explained. And the fact that the loan does not require a collateral makes it the best option for you when you’re having a financial emergency, especially in your business. While most lenders can give you the loan even for recreation purposes, do not rush to taking the loan unless you need it to save your business. Or if have a clear and effective plan on how you’re going to pay back.

 

Is Debt Always A Bad Thing?

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Is debt always a bad thing? Many of us automatically assume debt is a hugely negative state of affairs, and while it’s true that unmanageable debt is frightening, it may surprise you to learn that some debt is actually positive. Often treated as a dirty word, most of us can’t avoid having some form of debt, while some try to actively avoid it.

And yet not all debt is created equal. There are some positive forms that could help you reach your goals quickly. You just have to know how to use it. Here’s how the right kind of debt can get you ahead of the financial game…

Debt Can Help You Make Money

It may sound hard to believe, but the right kind of debt really can help you to make money. The key is not to go into debt for consumer items you couldn’t otherwise afford, like that designer bag or new iPhone. Instead, use debt as a powerful tool to help you reach your life goals. Invest in an asset – like a house or apartment or even for something like doing an MBA and you’ll be channelling money into something that will pay you back. If you’re clever about the property you buy – selecting an up and coming area, negotiating a good purchase price armed with data from sites like MousePrice– then the value will rise over time. When you’re ready to sell, you will have accumulated a profit, even with the mortgage balance to settle. If you go into debt knowing that you’ll get greater value out of it further down the line then it’s a positive investment.

It Can Be Cost Effective For Purchases

Interest rates are at historic lows right now, so if you want to do something like buying a car, it’s actually better to use credit to make the purchase than dipping into savings and investments. If you have money in tax free savings like ISAs or even stocks and bonds, it doesn’t make sense to cancel out the returns you get from them in order to make a purchase. Considering your overall financial picture, you’re better off using credit to pay – especially if you lose tax benefits by liquidating an asset.

You Can Fill In Cash Flow Gaps

For those who have a portfolio career, are self-employed or starting their own business or work in a job that is highly dependent on commission, life often involves a fluctuating income. When used responsibly, short-term loans can get you through time periods where cashflow is lean – provided you use the boom times to pay them off. This regular repayment schedule will also help to build a really good credit rating, as lenders can see a history of responsible borrowing. You will then be offered better rates, reducing the overall cost of borrowing. This creates a virtuous circle of good credit that benefits your financial situation.

Debt doesn’t have to be an intimidating or shameful prospect- if you learn to use it responsibly, it can really be a force for good in your life.

 

The Good, the Bad and the Ugly: Teaching Your Children about Debt and Borrowing Money

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Most people don’t get into debt out of sheer stupidity. Most people get into debt because they have not been educated about money – or more specifically borrowing money. They find themselves in a situation whereby they need money quickly, and they borrow it without fully understanding what they are letting themselves into. There are then those who are enticed by all of these amazing promotional offers, and they sign up to a number of credit cards without considering how this is going to impact their rating. The obvious solution may seem simple: avoid borrowing money altogether. However, if you do this, you won’t have a credit history at all, and this is arguably just as damaging as having a bad credit report. So, we need to educate our children about borrowing money responsibly, the impact of borrowing on their credit report, and what to do if they do find themselves in debt. After all, in some cases, debt is unavoidable.

LESSON ONE: THE VARIOUS WAYS YOU CAN BORROW MONEY

Firstly, you need to make sure your children are aware of the different methods of borrowing money. In general, this can be split into two categories: loans and credit cards. Of course, there are then many different types of loans and credit cards. With regards to the former, you will be given a certain amount of money, which you will then have to pay back to the lender with interest on top. With a credit card, you will have access to a certain amount of money, and you will only be subject to interest if you do not pay the full amount off by a certain day of the month. Credit cards are ideal for those who need access to money to tick them over until they get paid. If you are self-employed, for example, and you don’t know what date of the month your money is going to come in, you can use a credit card to tide you over until then. A loan is more suitable when you are making a large purchase. There are many different types of loans, including bank loans, secured loans, and payday loans. The latter provides a fast loan approval for those in need of money as quickly as possible. However, the APR tends to be very high, so you’ll end up spending a lot of money taking the loan out. A secured loan will be secured against one of your assets, for example, your car or your home. If you default on your payments, the lender can sell your vehicle or your property to cover the payments you have missed. It is important to teach your children about the different factors they need to consider when taking out a loan or applying for a credit card. A lot of people never learn about APR, and so they end up borrowing money without having a full understanding of how much they are paying for it. This is an easy way to get into debt, and it can be avoided with simple education.

LESSON TWO: CREDIT REPORT

The next thing you need to teach your children about is their credit report. Explain that their credit report is something that a lender will view when determining whether to lend them money. This does not only relate to companies who deal with loans and credit cards, but catalogue companies, furniture stores offering financial plans to pay off furniture over the course of a few years, phone contract businesses, and such like. It is, therefore, critical to maintain a good credit score. Unfortunately, a lot of people end up causing damage to their credit report without even realising it. This is why you need to teach your children about the different aspects that do and do not impact a credit score, and the steps they can take to improve their credit score. One thing a lot of people do not realise is that they do not have one set credit score. There are a number of companies that provide credit reports, and most companies and lenders will look at one or several credit reports to gauge whether someone is credible to lend to. People can access their credit reports online, and it is a good idea to do so, so that you can have a general understanding of what your score is, where you are going wrong, and where you are going right.

So, let’s go over the different elements that make up your credit report, and the impact they have:

  • Your personal information – One of the easiest and most effective ways to improve your credit score is to make sure that all of your personal information is up to date. If it isn’t, lenders may struggle to verify who you are, and this can have a negative impact on your rating. Plus, if your personal details aren’t correct, you could miss out on notifications, which could result in you failing to pay a bill, which will, of course, have a bad impact on your credit score.
  • The total balance of your active credit accounts – The total balance of your active credit accounts plays a crucial role in determining your score. If you have a mortgage, this will not be included within the calculations. This includes your credit cards, any purchases you are still paying for, overdraft facilities you are using, and any loans you have taken out. If you owe more than $15,000, this will have a negative impact on your credit score. If you owe more than $30,000, this will decrease your score even further.
  • How much of your available credit you are using – There are a number of factors to consider here. Firstly, your highest credit limit will play a role. If you have a credit card with a limit over $1,000, this will improve your credit rating, as it shows that you are a low risk borrower. However, you also need to think about how much of your available credit you are using. For example, if you are using 95 percent of the credit you have available to you, this is bound to have a negative impact on your score, as it indicates you are relying heavily on credit.
  • Payments – Are you keeping up with your payments? This is the most important factor of them all when it comes to your credit score, as a late or missed payment will stay on your account for roughly six years.
    • The age of your credit accounts – Again, there are a number of factors to take into account here. Firstly, the average age of all of your credit accounts is considered. Having an average age of 33 months or more is considered a positive. Also, the number of new credit accounts you have opened. If you have opened a number of accounts within a three-month period, for example, this will have a negative impact. However, if you have only opened one credit account, this will not have a bad impact on your score.
    • Credit applications – This is where a lot of people have a negative effect on their score without even realising. Many people decide to make numerous credit applications, and then they will accept the best credit card they get approved for. A lot of people also try their luck, applying for cards they are unlucky to get accepted for on the off chance that they will. This will have a negative impact on your score, as credit applications are included in your report. There are soft searches, which don’t impact your score, and hard searches, which do impact your score. The best thing to do is use one of the online services that are available to determine your chances of being accepted. This ensures you only apply for credit cards whereby you have a high chance of approval, so that you don’t need to carry out numerous applications.

LESSON THREE: WHAT TO DO IF YOU GET INTO DEBT

Last but not least, it is important not only to teach our children about avoiding getting into debt, but also about what to do if you do get into debt. The problem can easily get worse and worse when someone does not know how to deal with debt. It can seem like the end of the world, but it doesn’t need to be. In fact, you will find plenty of inspirational stories on the Internet about people that have gotten themselves out of severe debt.

Most people agree that the best way to tackle debt is to pay off the biggest debt first while making the minimum payments on all loans and cards to ensure you are not subject to any further fees. You should also ring up your credit card provider or any other lender you owe money to and see if you can negotiate more favourable terms. It is then a case of examining where you went wrong and how you got into debt in the first place. This will help to ensure you do not make the same mistake again.

 

The Pros And Cons Of Borrowing Money

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There will be a time in everyone’s life when you want or need to buy something, but don’t have enough cash to do so. When this time comes, you usually have two options; You can either not buy the thing that you wanted/needed to buy (or buy it later, when you have the money spare), or borrow the money from someone. If it’s an emergency or you’re really impatient then borrowing, whether it be from a loved one, the bank, or an online lender, will probably seem like a great idea. However, there is a lot to take into consideration before you borrow money from anywhere. Here are some pros and cons that you should know about.

+ Covers Emergencies

There is always a chance that something can go wrong in life, and sometimes, money is required to fix this problem. It doesn’t matter if you’re boiler has just broken, you get an unexpected bill, or you’ve just run out of money if you need money quickly then applying for cash loans online is usually the first thing that you think of.

– It’s Not Free

Everything comes at a cost, and borrowed money is no exception. When you borrow money, the interest rates can get incredibly high, with the late payment fees being even higher, so you need to be sure to make payments when they’re due and read all of the small print before applying. Even loved ones sometimes add interest to money you’ve borrowed, but, even if they don’t, if you can’t afford to pay the money back, the strain on the relationship is a high cost to pay.

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+ You Can Make Large Purchases

Unless you have a large amount of money saved, there are some purchases that you simply can’t make unless you borrow money. A house, a car, and business premises are the biggest examples. Your regular income wouldn’t be able to cover the cost of these things, but you can still buy them if you borrow money.

– You Might Not Be Able To Pay It Back

As I’ve already mentioned, there is always the chance that something can go wrong. Unfortunately, if there is an emergency, or you got paid less one month, you might not be able to make a payment, which means that a late payment fee might be added to the loan. If this happens a few times, the debt could get so big that you just can’t pay it back.

+ Opens Doors And Opportunities

Borrowing money isn’t always ideal, but sometimes, it is exactly what you need to improve your life one way or another. Buying a car would mean that you can travel further for work, which means that you might be able to get a better job. You could even take out a loan to start your own business, which could prove to be incredibly successful.

People borrow money for all sorts of reasons, but you should always make sure that you’re borrowing for the right reasons, and that you have the cash to make the repayments.

Financial Faculty: An Education In Money

Money. It’s amazing that something which is, in reality, completely fabricated can be so difficult to understand and control. No one finds this task easy. And, no one has mastered the art entirely. But, there are still those out there that are better at managing their money than the rest of us. For the lucky few in this position, money will be on their mind a lot; without having to consciously force themselves to be careful. This sort of attitude isn’t something you are born with, though, it’s something that is learned. To help you out with this, this post will be going through three of the biggest areas of finance. And, the ways that you can start working to take control. This sort of effort will make life much easier for you; so, it’s worth giving it a shot.

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  • Budgeting And Saving

Like any good financial guide; this has to start with budgeting. Without the ability to budget, it’s impossible to make improvements elsewhere. The best way to start something like this is by limiting your spending to the bare essentials. After doing this for several weeks, you will have a good idea of the money you have spare each week. This effort will get you nice and far into proper savings; if you use the money, you have left over correctly. Of course, it is also very helpful to make some actual plans for your budget. Knowing how much you’re allowed to spend each week before the week even starts, is a great way to ensure that you don’t end up in trouble. Nearly no school teaches kids to budget; so, this is something you learn by yourself. But, it’s very much worth it.

With a good budget in place, you should find it nice and easy to start working on your savings. A lot of people think that they have plenty of time to start saving. And, they will put off for a long time. But, with anything like this, it’s always best to start as early as you possibly can. This gives you more time to put money away; giving you the chance to save more during your time in work. Plus, being young doesn’t make you immune to the woes of money troubles. So, to protect your financial future, you should always have savings. Experts recommend that you save at least enough to live for three months out of work. This gives you the chance to get into another role; if you have trouble at work. And, it gives you a good reserve to help you in dire times.

There are loads of services out there to help you with an area like this. In fact, this is one of the biggest areas of finances. There are loads of different mobile apps and other tools which can be used to monitor your money and budget accordingly. This sort of resource can be great while you’re learning the ropes. And, to save, you should be using a dedicated savings account. Bonds will be too far; as you won’t be able to access your money when you want to. So, instead, you need to find the best instant-access account you can. Most banks have more than one. And, they don’t have strict requirements to be able to use them. Have a look at some comparison sites to find the account with the highest return.

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  • Loans And Borrowing

Borrowing money is often seen as a negative way to handle your finances. But, this isn’t always the case. Loans can be a great way to afford something you otherwise couldn’t; as long as you choose the right loan. In most cases, payday and short term loans are best to avoid. They are expensive and hard to settle if you have further money issues. And, they will hammer your credit rating; if you fail to pay them on time. Your credit score is one of the most important aspects of your finances. It’s dictated by your financial history and is usually the deciding factor when it comes to companies giving you a loan or other agreement. Using websites like Experian is a great way to monitor this part of your money. They can give you the advice to make improvements. And, they don’t charge a huge amount for the service. But, this is only one side of the coin. Now, it’s time to get back to borrowing.

Financial experts talk about strategic borrowing all the time. And, it’s something that makes a lot of sense; when you understand it. This practice involves planning your loans to have as little impact on your money as possible. It’s designed to help people get money through loans without having to change their life massively. Of course, though, like anything like this, it takes loads of work to get started. A great example of this can be seen in consolidating loans into one bigger one. By moving loans from here to there, and having them all in one place at the end, you will make them much easier to manage. And, they will be cheaper, too. The same sort of idea can be applied to getting a long-term loan instead of several shorter one; you just have to plan ahead.

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  • Investment, Passive Income, And Career

Now, it’s time to look at how you can make some money; not just how to save or give it away. Investment is one of the best ways to make money, in the modern world. Investment enables you to make extra out of the money you already have; without having to do much more work. For people new to this game, it’s best to start off small. Look into peer-lending and share options which will make you some decent money in a short time; but, have a decent amount of risk. Then, consider some longer options, like government bonds, too. This will give you a good range of choices. So, now, you just have to think about what would be best for you. To get some extra help here, it could be worth talking to a professional investment advisor. These people have loads of experience in this field and can help you make the most of your money.

But, what are the benefits of investing? You have to put in an awful lot of work into something like this. But, when you think about the results; it’s worth it. Over time, your investments will grow and start to generate a decent amount of passive income for you. When you’ve got enough invested; this could cover things like your mortgage or rent each month. And, this is a great benefit. Along with the income benefits, you also benefit from having money saved by inaccessible. This means that you have assets and wealth; but, you can’t waste in on a whim. This gives you the security of a savings account, with the financial gains of a low hours job.

Of course, you can’t just think about the money you make passively, though. You also have to consider the money that you make through your work. As you work on your career, you should always be aiming to make your future brighter. This means that you should never stay in a job for more than a few years without making any progression. It’s essential that you climb the ladder as early as you can. Otherwise, it will be hard for you to find another job which can get you somewhere. Of course, one of the best ways to skip this step is by starting your own business. But, this will be hard in itself.

Hopefully, this will give you a good idea of what needs to be done; if you want to start working harder on your finances. Most people don’t bother with this sort of effort. And, most people haven’t been taught how to handle it. But, it’s easy to make sure that you’re handling your money well. It just takes some work.