Posts tagged: low interest unsecured loan

Low Interest Unsecured Loans

The definition of an unsecured loan is a loan where no collateral is required as security for the lender. There are kinds of unsecured loans out there, including credit cards, signature loans, and even certain kids of personal loans. The trick is that low interest unsecured signature loans are hard to come by unless you meet a pretty specific set of criteria.

The first criteria you’ll have to meet if you want to get an unsecured loan with low interest is a good credit score. I know you’re used to seeing a thousand marketing messages a day that say you’re credit doesn’t matter and ‘everyone qualifies!’ but that’s just not reality.

If you walk into the average bank or credit union and ask for a loan or a line of credit that doesn’t require any collateral, their first move will be to look at your credit report. If they’re going to hand over hundreds or thousands of dollars with nothing guaranteeing their money except your signature, they’re going to want to see that you have a basically spotless credit history.

And not only that, they’re going to look at your total indebtedness. Lenders have statistical tables that tell them what happens to the default rate when a borrower’s monthly payment to monthly income ratio passes a certain percentage. If you’re anywhere close to that percentage you don’t have much chance of getting an unsecured with a low interest rate, or any interest rate.

There’s a reason banks tend to be so profitable – they’re very cold and calculated about how they handle their loanable funds. If you don’t meet the profile they want, no loan for you. And that’s regardless of a pretty face, or a charming smile, or a promise of “I swear I’ll make my payments on time.”

The fact that they act this way is probably in everyone’s best interest. After all, they’re using years and years of statistical data to decide what a borrower can handle. You’re using nothing but your skewed view of yourself and your emotional attachment to whatever you’re hoping to buy. It’s a case of the bank knowing what’s better for you than you do, and you should just trust the system.

At the same time, if you do happen to qualify for instant decision unsecured personal loans, use it wisely and make your payments on time! The more consistently and intelligently you use credit, the easier it will be to get the bankers to trust you. Comes in real handy when you want to do fun things like buy a new car or your very first home.