What are unsecured emergency loans?
When financial disaster strikes, you may head to the Internet to find out what loans can help you in a pinch. As you search for something that works fast, you may come across unsecured emergency loans.
Ever heard of them before? If not, here’s a short but informative guide to teach you the basics.
What does secured mean?
In the financial world, secured means you’ve supported your application for a personal loan with an asset of equal value. It hangs in the balance during the duration of your term.
If you manage to pay within your term as agreed, your asset will remain yours. But if something prevents you from paying back what you owe, your lender may claim your asset as payment — whether it’s a house, car, or jewelry set.
To a lender, this agreement has more security than loans without collateral because they’ll get some form of payment no matter what.
What are unsecured loans?
An unsecured loan has no collateral. Instead, you shore up your application with the promise you have the cash to pay back what you owe.
When it comes to unsecured emergency loans, these are short term loans that you should only ever use in unexpected emergencies.
Online installment loans from MoneyKey are a prime example of unsecured emergency loans. They’re designed as a safety net for unexpected repairs and emergency expenses when your savings fall short. You don’t need to provide collateral to be approved; your approval for these online installment loans relies solely on your creditworthiness.
What is creditworthiness?
Creditworthiness, or how worthy you are of credit, is something lenders consider before they grant you unsecured funds. It tells them how likely you’ll make your repayments on time.
What factors into your creditworthiness?
While individual lenders may have unique eligibility requirements, most unsecured emergency loan lenders will look at some or all of the following information before making a funding decision:
- Credit score
- Debt to income ratio
- Employment history
- Income
By looking at your current financial capabilities and your past borrowing habits, they may have a pretty good idea if you’re a trustworthy borrower.
Other requirements may affect your application
On top of these factors, lenders may also consider your age, location, and profession to determine if you qualify for a loan.
Why does your career matter?
It has to do with the laws regulating interest rates. If you are a military member, the law says you cannot have an interest rate higher than 36 percent. This means lenders that offer interest rates higher than 36 percent may not be available to you, even if you qualify in every other way.
How do you improve your chances of being approved?
When it comes to being approved for an unsecured loan, there is no collateral to sweeten the deal. It all relies on your creditworthiness.
This means your approval hinges on your cash flow and credit history. Anything you can do to show a lender you can make your payments will improve your chances of being approved. So, make good credit habits to add positive history to your file and see what you can do to free up your expendable cash.
Meanwhile, comparison shop to ensure you’re applying to options that reflect your financial profile. You need to find a suitable match by picking a lender that offers loans in your state for your age group and career.
These considerations may help streamline your next borrowing expenses, even in an emergency.
