Unsecured loans: updated
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With a no collateral loan, or an unsecured loan, it's always a pricey form of lending. If you don't have some form of collateral security for the lender, like home equity, a vehicle, consumer goods of some kind (e.g. - jewelry), accessible stocks or bonds, chattel paper, or promissory notes, you will be paying a steep price in interest (APR) over the life of the loan.
No Collateral Loans Can Be Pricey -Banks mitigate the losses they incur selling unsecured notes by charging high interest rates.
This is common knowledge for borrowers who have found themselves in the unfortunate situation where they don't have any collateral to offer their bank. Borrowers soon find out that if when they request unsecured funds they are going to be paying interest rates upwards of 10% to 13% depending on your FICO score (credit rating and history) at the time of borrowing.
No Collateral Can Simply Mean No Approval - For some banks, depending on current market fluctuations, will "take a pass" in approving ANY personal loans that don't have a security marker.
This is when borrowers who have bad credit get frustrated. When you don't have a decent credit rating (FICO of 680 or higher), AND you don't have any form of security to offer the lender, then the local bank or credit union may deny the loan. Most conservative banks will take this course of action in a depressed economy.
FICO Score of 650 for a Loan Without Collateral
If your FICO score is below 650, then your interest rate on a unsecured note can cost as much 15%. This is unfortunate, but sometimes necessary for those in dire financial straights. The numbers on this are calculated and presented on our posts, with some detail on the plight of real people - real borrower accounts.
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