Many Utahns turn to signature loans to address emergency financial problems. Unlike typical payday loans, though, signature ones are wholly unsecured. They don’t require any collateral, which is why anyone can apply and qualify without leaving a check or having a checking account.
The only security for signature loans in Provo, Sandy, and Taylorsville is a “Promise to Pay” agreement, which is just a promissory note. Although such a contract is legal and binding, many borrowers still feel that they can get away with non-payment.
If you think that you can disappear on your lender after receiving the money without any consequences, think again. Financial institutions have policies in place to discourage borrowers from defaulting.
Below are some of the measures that unsecured loan lenders observe:
They Charge Late-Payment Fees
Lenders have the right to charge extra if borrowers fail to pay on time. To avoid resorting to a collection to obtain a delinquent payment, a lender can allow you to roll over the debt.
A “rollover” is the act of renewing the term of the loan in exchange for a fee. Usually, the charge is equal to the original fee applied to loan the money in the first place. In other words, you’ll pay extra to buy more time to repay without borrowing more cash.
If you make a habit of asking for a rollover, your interest may accrue to the point of surpassing the size of the loan amount.
They Report to Credit Bureaus
An unsecured loan won’t necessarily affect your credit score because your lender may only perform a soft inquiry to prevent fraud. If you don’t manage your financial obligation responsibly, though, you can get a negative item in your credit history.
Many lenders report payment information, or the lack thereof, to the credit bureau. Having bad credit can follow you around for a while, making it more difficult for you to take out loans in the long run.
They Incentivize Punctual Payers
As mentioned, many lenders stay in touch with credit bureaus. So, paying your unsecured loan on time can help improve your credit.
Many individuals that apply for unsecured loans are usually those marginalized by traditional banks. Unsecured loans offer an opportunity to increase credit scores and to qualify for more loan options down the road.
Furthermore, some lenders raise the line of credit of model payers. If your payment history with your lender is good and your income increase, you might be allowed to borrow more in the future and with less interest.
They Simplify Future Loan Requests
Filling out new applications can be a hassle. Establishing good relations with a reputable lender is one way to render your signature loan request stress-free. Burning bridges with different lenders can inconvenience you on many levels.
Many unsecured loan lenders rely on repeat business. They make it simpler for past customers to get approved by processing requests over the phone.
Signature loans might be free of collateral, but they’re not without punishments. Delinquency will inevitably affect your life one way or another, so be a responsible borrower.