Is a Fast Unsecured Loan Right for You?

Basic Tips on Taking Out a Fast Unsecured Loan

Need money right away? If a medical emergency occurs or if a bill comes due and you don't have enough money on hand, it makes sense to look for a fast unsecured loan. If you can find an unsecured loan quickly, you could have the means to cover your expenses and pay all of your bills. If you find yourself in need of a fast unsecured loan, it is important you know what options exist, so you find the best solution you can.

What are Unsecured Loans?

• No Collateral-Unsecured loans are loans that require no collateral or security. With an unsecured loan, the lender only has your legal pledge to pay back the loan. It doesn't have the security of repossessing your assets, if you default on the payments.
• Strong Credit and Income- To get a fast unsecured loan from a bank or a credit union, you need to have good credit. The interest rate on an unsecured loan is based on your income, credit score and payment history. Rates are high. Citibank, for example, offers fixed rates ranging from 10.49% APR to 25.49% APR, on loans from $500 to $50,000. That means even if you have excellent credit and strong income you will pay at least 10.49% interest.

Where Can You Get An Unsecured Loan, Fast?

Different types of companies offer fast unsecured loans.

• Banks & Credit Unions- Even though banks and credit unions will only approve your unsecured loan application if you meet the credit and income requirements, it can be possible to get cash quickly from them. Wells Fargo states that it offers "immediate funding"—you'll know if you qualify for the loan within hours, and usually have the funds the next business day."
• Online Lenders- Do a quick search online for "fast unsecured loans" and you will find a variety of choices. The sites will advertise just how fast and easy it is to get an unsecured loan. Bad credit or no credit, they claim, is no barrier to qualifying. Some online lenders say 100% approval is guaranteed. Everything can be done by phone, fax, and email, so you can get money without ever leaving home.
• Payday Loans- You can get a fast unsecured loan from a traditional payday lender that operates a in a physical, storefront operation. You have to supply a current pay-stub as proof that you are employed, in order to be approved. In recent years, the number of payday lenders offering loans online has mushroomed.

Pitfalls of Unsecured Loans

When you need money fast, it is easy to focus more on your short-term needs than on the long-term consequences. The ads for fast unsecured loans emphasize only the good parts: your approval is guaranteed, your bad credit is not a problem, and you can have the money in hours. What is not always clear are: the fees you pay, the interest you are charged, and what happens if you default.

• Fees- You may have to pay an application fee or processing fee. Given the small size of most online or payday unsecured loans, the fee can be a significant percentage of what you borrow.
• High Interest-Fast unsecured loans come with extremely high interest. Your rate is usually quoted in terms of the costs for every $100 borrowed. For example, you may be quoted a $17.00 charge for every $100 you borrow for a two-week loan. If you calculate the annual interest rate for that loan it $442%!
• Consequences of Default
  • Penalties- If you don't repay the loan as agreed, costs add up very quickly. You can also be hit with a bounced check charge from your bank, when the check that you gave the lender bounces or the automatic draft you gave the lender permission to take does not clear. Once you default on fast unsecured loan, it is very hard to dig out.
  • Aggressive Collections- Lenders have a history of using very aggressive collection efforts to collect on defaulted loans. Bills.com receives regular reports from readers who have been threatened with jail if they don't pay, even though making such threats is illegal. Defaulted loans can lead to lawsuits and judgments, which are then enforced through wage garnishments and bank levies.
• Scams- If you are desperate to borrow, it is easy to get taken advantage of. Be careful about the company you choose. You don't want to give your social security number and bank account information to a scammer. Check out the reputation of any firm you consider. Read what the FTC says about fast unsecured loans scams.

Alternatives to Fast Unsecured Loans

If you are considering a fast unsecured loan it is usually because you are don't have other alternatives. Even if you know the risks, the consequences of not borrowing the money seem worse, when getting a loan can be the only way for you to make your car payment or avoid having your power shut off. These kinds of unsecured loans should be used only as an option of last resort. They are band-aids, at best. Never take out a fast unsecured loan for more than you are very confident that you can pay back on your next paycheck.

You can't borrow your way out of debt. If you are taking out a short-term unsecured loan, it is usually an indication that you have other debts that are troubling you. Fast unsecured loans are not going to help you solve long-term debt issues. If you are considering taking out an unsecured loan, it is a wakeup call to look at your overall finances and plot a course to become debt free.

Recommendations

Some basic steps you should take are to:

1. Make a Budget- Look at all your expenses, figure out what you can trim, and live within your means.
2. Examine Debt Relief Options-- Look at debt resolution options that will break your cycle of debt.
   • Consider credit counseling, if you have high interest credit debt, consider credit counseling.
   • Consider debt settlement, if you are struggling to make minimum payments on your debt.
   • Look into bankruptcy, if you can't afford the payment debt settlement requires.