A personal loan is an unsecured loan. This means that it is not backed by collateral, such as your home or vehicle. Because the loan isn’t secured, lenders must use your credit score when determining how much money they can loan you, and at what interest rate. Additionally, you will likely be able to borrow less money for a shorter time at a higher interest rate.
When you apply for a personal loan, the lender will judge you on the following:
The first four refer to your ability and willingness to repay the loan and the last one refers to your general economic situation.
How do Personal Loans work?
Once you submit your information to the lender, they will determine the amount of money they are willing to lend you, for how long, and at what interest rate. If you accept the terms of the loan, they will provide you with the money and you will be responsible for paying it back on the schedule they outlined.
What happens if I can’t pay my personal loan back?
The most obvious thing that happens is that your credit score may be damaged, which can impact your ability to secure financing in the future for a mortgage, loans, a car, etc. After you are 30 days late with a payment, your lender can report it to the three major credit bureaus, Equifax, Experian, and TransUnion. They will likely report it again as it becomes 60, 90, and 120 days past due, meaning failure to repay a single loan can have a large, lasting impact on your credit history. In some cases, the lender may even pursue legal action against the borrower. This can result in an expensive legal battle. If the borrower loses, they will not only be responsible for the original debt, but for their own, and possibly the lender’s, legal fees. If they are unable to pay, they can be forced into bankruptcy.
Are there alternatives to unsecured Personal Loans?
Yes! You can apply for a secured loan. This is a loan backed by collateral the lender finds valuable, like your home, a precious object, equity in a company, etc. With a secured loan, you can likely get more money with a longer repayment time for a lower interest rate. This means that not only will your monthly payment be more affordable, but the actual amount of money you pay over the lifetime of the loan can be lower than if you’d borrowed the same amount of money using an unsecured loan. The downside is that if you fail to repay the loan, you can lose the asset. Some secured loans, such as mortgages, can have long lead times. This makes them less appealing to borrowers needing funds for an unexpected, immediate expense.
How do I get a Secured Loan?
Lenders have processes to go through to get a secured loan. They will ask for certain documents, like proof of ownership of the asset you are using to secure the loan. Once they’ve had a chance to review your documentation, the fact that the loan is secured by more than just your credit history allows lenders to offer you improved rates over what you would get with an unsecured personal loan.
What are the different kinds of secured loans?
There are a number of different types of secured loans:
- Vehicle Loans
- CD and Saving-Secured Loans
- Pawnbroker Loans
- Title Loans
Mortgages: These loans are secured against whatever property is being purchased. They are generally for huge sums, the cost of a house for example, and have a repayment time lasting between 15 and 30 years.
Vehicle Loans: These are secured against a vehicle being purchased. Generally, the lender pays for the full price of the vehicle and the borrower pays them back in monthly installments.
CD and Savings-Secured Loans: These loans are secured against the money in savings account. During the length of the loan, the borrower doesn’t have access to the funds in the account.
Pawnbroker Loans: These are secured with some sort of collateral, jewelry, a musical instrument, etc. If the borrower defaults on the loan, the lender takes ownership of the item.
Title Loans: These are secured using a clear-and-free vehicle as collateral. Unlike savings-secured and pawnbroker loans, you get to keep and use your vehicle for the duration of the term of the loan. And unlike mortgages or vehicle loans, there are no restrictions on what you use the borrowed money for. You can immediately use it for emergencies or other unexpected expenses.
How to get a Title Loan with LoanMart
As you can see, a title loan is a great choice if you need quick funds for an unanticipated expense while keeping the use of your car, all without a lengthy application process. If you own a clear-and-free vehicle in your name you potentially qualify for an auto title loan of up to $30,0001. Because of LoanMart’s streamlined registration process, the turnaround time between when you submit your information and when you receive your money could be less than 24 hours3.
With our easy process, we give you three ways to contact us that make it convenient for you:
- Visit a participating location
- Call us at 1-855-422-7412
- Sign up online without leaving your home
Once you’ve decided how you want to get in touch, just follow these steps to get the money you need1:
- Fill out the registration form.
- Submit the required documents to your LoanMart representative.
- Sign your LoanMart agreement
- Collect your funds1!