For banks, loans are basically nothing but a business. They invest a certain amount and receive a profit called interest in the financial language. However, there is a degree of risk to the business of financial institutions, as the repayment of a loan could fail, so banks in principle do not lend without collateral.
A loan without collateral: what is suitable as collateral?
The exciting question for any person who wants to have a loan is: So what are the appropriate collateral that you can give when making a loan application to get the loan? In general, a distinction is made between assets and assets that can be used as collateral. Assets include salaries, savings accounts, pension funds and other investments.
Real assets are real estate, land, household appliances or vehicles. However, certain assets may not be used as collateral because they may be seized in an emergency. This applies to all devices that are necessary for survival. For example, a stove or a bed can not be seized. But what do you do if you can not teach any of these things and therefore actually need a loan without collateral?
A loan without collateral: the two common variants
If you want a loan without collateral, you have to deal with a variety of problems. Because he has no collateral, he most likely has a negative credit bureau entry, this also means his general credit standing is in great doubt.
In such situations, there are really only two ways to get a loan: Either you bring in a guarantor. He signs the loan application with one and insures the bank in this way so that they will definitely get their money. Or you turn to a private person and try to replace the lack of collateral by trust.
Occasionally, banks on the Internet do not check whether collateral exists and rely on the information provided by the borrowers on the applications. This would be a third variant, but there are two things to note: Firstly, one should not make false statements and second, these financial institutions usually take substantially higher interest rates on their loans. The rule is that interest charges increase as less collateral is required.