If you wanted quick cash, lenders would usually want some sort of collateral. For example, if you have a home, they’d want to put a second mortgage or line of credit against your home. If you have a car, they’d want to put a lien against your car. You can even use gold as collateral to take out a loan.
But what if you needed extra money but didn’t have any physical property to put up as collateral? Very few traditional lenders are willing to give people money without any guarantee.
The only exception is quick cash payday loan lenders. These lenders specialize in giving people money without taking any collateral in return.
Why Don’t These Lenders Require Collateral?
These lenders don’t require collateral because they’re willing to take more risk in order to earn a higher fee.
Most traditional lenders charge between 9% and 18% interest per year. A quick cash lender on the other hand charges around 15% for a one month loan.
A traditional lender would lose a lot of money if one in ten people defaulted on their loans. That’s why they need to be so careful about who they give money to – Each default is very costly to them.
On the other hand, with short term lenders, they can get by without collateral because they can take a one in ten default. The earnings they make in total cover their loss, allowing them to lend money to anyone without collateral because in the long run they come out ahead.
Even Without Collateral, You Still Need …
Just because these lenders don’t require collateral doesn’t mean they’re willing to give money to just anyone however. They’re still going to do everything in their power to make sure they get their money back.
The main thing they’re looking for in this case is income. They want to make sure your income is high enough to be able to repay their loan by the time your loan term is due. If you can convince them that you can indeed repay your loan, they’re going to give you the money.
Quick cash lenders aren’t necessarily looking for whether or not you’ll want to repay the loan; they’re looking at whether or not you can repay the loan.
In summary, today it’s much easier to get a loan without any collateral. You don’t need a car, a home or a nice watch to put down as a deposit. The money can be wired to your bank account in 24 hours, without needing any kind of insurance for the lender.