When you lack income, sometimes you’re forced to take out a loan. But loans are hard to get without income. Though baffling at first, this cycle is precisely how banks operate in terms of lending money. One thing is certain: before taking any action, they have to ensure that a customer can service the loan – or the deal is off.
And getting an unsecured loan without income can be a particularly daunting experience. If you don’t deal with finances in your daily work, all the lingo might put you off. But there’s nothing to worry about. Given a little time, you’ll soon learn the difference between a credit score and credit check.
Each individual has different circumstances that might or might not meet the lender’s requirements. The anarchy days of the Wild West are long gone: banks and other granting authorities are giving their best to comply with regulations to avoid any irregularities or lawsuits.
As you can see, this approach serves the lender well, but underprivileged customers have a hard time getting what they want. Before attempting to obtain a loan without income, there are a few essential things to consider. Below are some common obstacles you might encounter when applying for an unsecured loan.
Some Info about Unsecured Loans
Security means everything in the finance world. Contracting parties take every precaution, necessary or not, to avoid pitfalls. In other words, they leave nothing to chance. That’s why the term unsecured loan seems like a ridiculous idea at first. What bank would place trust in a customer with no backup assets? But there’s reasoning and logic behind it.
The thing is – the loan is not entirely unsecured. Defaulting on such a loan is far from inconsequential. If there were no repercussions, people would borrow large sums every day without a care in the world. But banks have devised a system to penalize non-complying citizens without any collaterals (we’ll cover that a bit later.)
Range and APR
Here’s how these loans work in practice. They are usually between $1,000 and $100,000, with different rates applied depending on the case. Borrowers should bear in mind that each lender has their own agenda, terms and conditions, amounts, etc. Taking a loan without asking any questions is pretty much a disastrous idea. Plus, you will surely spend much more than you thought with all the transaction fees, closing costs, and so on.
One important thing to look out for is the APR (annual percentage rate.) When talking interest, most of us think on a monthly basis. But it’s also helpful to look at the big picture for long-term calculations. For unsecured loans, the APR is between 6% and 36%.
Also, without any collaterals involved, the whole procedure runs faster as there’s nothing to evaluate. Online prequalification (though not provided by all lenders) allows you to compare rates; also, you can get results within an hour.
How to Approach the Issue?
Once you go over all the technical details related to the loan, it’s time to make a decision. That’s easy to do with a fixed income, knowing it’s impossible to default. But we are here to consider the opposite situation.
The one where you convince an institution that you’re an honest and responsible customer. However, the bank is not an institution that will take your word for anything. Without presenting some evidence of your financial state, you might as well be non-existent.
The first step when applying is being realistic about your affairs. Blind optimism has no place in finance; it takes a good, honest look at your numbers to get results. In this case, no income can present a serious obstacle to getting a loan. Even though a financial institution might grant you the money anyhow, it can be a bad idea for several reasons.
Unsecured loans have pretty high interest rates. Other than that, there is a string of fixed expenses piling up. These costs by themselves aren’t troublesome when you have a monthly salary to cover them. But without the income, you inevitably end up in the high-risk category.
Also, it’s virtually impossible to cover up any shortcomings; that’s a waste of time. Banks are thorough in their credit checks, so if you fall short in any category, it will come out eventually.
Possible Wrong Moves
When steady income is out of the picture, some loans are worse than others. You need to be aware which routes can take you to a dead-end. Here are a few tricky loans you should probably steer clear from.
Though brokers can be valuable in mediation, they’re best avoided in loan applications. They can be too impartial and recommend their favorite lender to gain a commission when it might not suit you at all. The quickest and most productive arrangement is directly between the lender and borrower, without involving suspicious third parties.
Next on our little list are car titles. One of the more expensive loans out there, it’s a very risky move for a borrower, especially without any income. Defaulting on such a loan can mean repossessing or auctioning off by the lender, and you can lose your vehicle just as quickly as you bought it.
Finally, the infamous credit cash advance. Sometimes you get the urge to take out cash by borrowing against your card. This practice can turn against you in a couple of ways. Often there are withdrawal limits that can annoy you, along with some extra costs that can set you back surreptitiously. Try to find information on debit and credit cards to get more valuable insight.
Penalties in Case of Default
Better safe than sorry – that saying never goes out of fashion. And when there is money involved, it’s best to be prepared for worst-case scenarios. Let’s look at a few things lenders do if you default on a loan.
Missed payments never go unnoticed. There are organizations called collection agencies that specialize in debt collection. Whenever you miss a payment, the lender sends it to the agency, where they keep score of your debts. If collection calls don’t do the job, they take legal action against you. The ideal solution is avoiding outstanding debts altogether, but it’s easier said than done for many people.
There’s more than one way for lenders to get their loans back. Placing a lien on assets is not uncommon in the US, or maybe seizing your income tax refunds in the future (if we’re talking about a federal student loan). A third way is to use wage garnishment to regain loan balance if necessary. All things considered, you should always aim to avoid court proceedings if possible.
And there you have it – an attempt for an overview of pursuing a loan uten inntekt as an option. Is it a good idea? There is no definite answer to this question. It all depends on individual circumstances. The bottom line is that you shouldn’t overlook any detail, no matter how insignificant it may seem. As a matter of fact, it’s pretty possible that lenders invented the fine print.
On the whole, unsecured loans are riskier than secured ones. While the latter implies repossession of assets (collaterals), the former can seriously damage your credit file. If that happens, you might not be able to borrow at all in the future. Before taking action, you should always review your financial history and get a complete, objective picture. Financial advisors can always help if something needs clarification.
No income doesn’t mean you can’t get a loan. There’s more than one way to do it. But it does require a carefully constructed strategy. It’s far easier to plan things with a fixed monthly income, but it’s possible to get a loan without it. You just have to go about it the right way.