Unsecured loan: how does it work?
The type of financing that is identified with the definition of unsecured loan has its own characteristics which are incorrectly considered “light”. But is it really easier to get it than a classic loan? The answer on paper would appear to be affirmative because if a bank offers an unsecured loan it should be based as a guarantee simply on the “handwritten signature of the applicant”.
In reality, however, the situation is not so, precisely because the main guarantee required, or the signature, must equally lead to a solid income, meritocratic and patrimonial situation as in the case of ‘traditional’ financing.
The unsecured loan clearly differs from a mortgage-backed mortgage instead. In this case, we know that costs will be high and complex procedures. This aspect is generally true for all collateralised loans (which can also be represented by a pledge ).
How are unsecured loans offered?
It is also a product that can be oriented both to a private individual and to a company. But beware, a bank will hardly advertise this type of financing directly and evidently. How to find them?
This type of loan is normally offered by large banks or by lenders linked to the territory such as the Bcc. Instead, it is quite difficult to find in online banks, which normally have a very ‘basic’ offer.
The ‘standard’ conditions
Unsecured loans have variable characteristics depending on the lending institution, although we can highlight some common peculiarities. In most cases, in fact, these are loans with a medium or long amortization plan (almost always above 18 months and not less than one year).
The maximum expected duration is generally up to 120 installments and in some exceptional cases even beyond. As regards rates, especially for higher amounts and longer durations, they can be offered at both fixed and variable rates. In this second case there is a spread plus an indexing value which is normally represented by the Reference rate bank.
What are the minimum necessary requirements?
As already mentioned at the beginning, no particular requirements are necessary for the applicant other than that of possessing a solid income and balance sheet situation sufficient to act as a guarantee for the bank to give a positive opinion. However, it is possible that the lender requires a guarantor but this is a non-fundamental and recurrent condition.
It is also necessary that those who apply for an unsecured loan have an excellent credit reputation : one must have matured a history in the field of financing, proving to be reliable and deserving of obtaining new credit.
How does the refund work?
The repayment of the loan usually takes place with the French amortization, therefore by periodically paying the installments made up of interest and principal. The repayment generally passes through a permanent debit on the current account of the installments until they are exhausted, and an early repayment penalty may be applied. The ‘allowable’ amount tends to be medium-high and can even exceed abundantly the 75,000 USD: the greater the sum required and the greater the duration with which to make the total refund.
- To give an example of a medium-small diffusion bank, we see that Litebank grants up to 75,000 USD in 60 installments with its unsecured loan while over 75,000 USD it reaches up to 72 installments. The rate can be both variable and fixed. Funding is offered only to companies (Source: official information sheet – 11/12/2017)
- Looking instead in the offer of one of the largest groups such as Cream bank, we find an unsecured loan for individuals that comes out of the most usual schemes with a minimum amount disbursed, in the Plus version, of 76,000 USD and a duration that starts from 36 months up to 15 years. (Source: Cream bank official website – 11/12/2017)
- Among the various loans in its offer, the Spin Lender also has the unsecured wedding project loan which allows you to obtain up to 20,000 USD to be repaid in a maximum of 60 months. The loan is dedicated to couples about to get married and is at a fixed rate.
With the examples just made it is clear that the conditions may vary and that the research must be oriented according to the amount of the sum that is being sought and the time available. Obviously larger banking groups can foresee larger sums and longer repayment times, but each individual case must be evaluated and analyzed without being able to make true generalizations.