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Unsecured Bank Loan Alternatives for Good or Excellent Credit

Unsecured Bank Loan Alternatives for Good or Excellent Credit

Lending criteria have been tightened in recent years due to rising levels of default amongst existing customers. According to Renaud Laplanche of Lending Club: “As the financial crisis becomes deeper and more challenging, even for creditworthy clients, it’s hard to get funding.” Although the cost of peer-to-peer loans has also gone up, they represent a viable unsecured bank loan alternative. Rather than borrowing money directly from a bank, it is possible to get a low interest unsecured loan from a regular person for up to $25,000. Person-to-person loan lenders do perform credit scoring in order to categorise the risk that a customer poses.

Low Interest Unsecured Loans from a Person-to-Person Lender

The leading lenders in America are Prosper.com and Lending Club; Zopa.com meets the needs of UK customers. As Bao Ong of Market Watch stated: “As more peer-to-peer lending companies pop up, they offer varying approaches. Some help set up loans between family and friends; others cobble money from many lenders for a loan between strangers.” Unlike unsecured bank loans, peer-to-peer lenders use a number of small investors to meet the demand for a cash advance. Although only fair, good and excellent credit score applicants will be accepted so the risk is reduced, this approach to lending is designed to prevent a single lender from losing out completely.

Peer to Peer Loans Us a Tiered Interest Rate Structure

A person-to-person or unsecured bank loan applicant will need a history of good credit. The majority of lenders now use a tiered interest rate structure which means that people with the highest credit scores will get the lowest rate personal loans. Although an applicant with a fair credit rating may still receive approval, the cost of borrowing will be higher as the risk of default rises as a credit score falls. Fortunately, there are some steps that can be taken to quickly improve a credit score rating.

Fix Credit Before Applying for Unsecured Tenant Loans

It is in the best interests of the applicant to perform a degree of credit score repair before applying for a low APR loan from a bank or person-to-person lender. Always pay down debt and spread an unpaid credit card balance over several cards so that less than 30 percent of the allocated credit limit is used. It is also advisable to check for credit report errors and get these corrected in order to get approval for a low APR peer-to-peer or unsecured bank loan.

Unsecured Bank Loan vs Peer to Peer Loans

In practical terms, there is very little difference between a loan from a bank and a loan from a person-to-person lender. They each offer low APR loans of up $25,000 after performing credit scoring. Peer-to-peer loans are another option that comparison sites ignore when making a recommendation because they don’t earn commission from the sale. Before signing up a low interest rate unsecured loan, always check to see what Prosper.com, Lending Club and Zopa.com are offering customers.

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How Pay Day Loans Can Become a Nightmare

The pay day loan industry is one of the fastest growing businesses concepts that our country has ever seen. Supposedly it is set-up for emergency access to money when you needed the money like yesterday.

This industry sprung up on the skirts of epidemic bankruptcies in the USA. Working class people had become accustomed to spending more than they had on the promise to pay the money back at a later date. Predictably such types of spending habits catch up with you and eventually people become so over extended with credit card payments, cars that they could not afford but wanted — and got anyway plus any of a number of other buy now pay later types of purchases that record bankruptcies were the result of many families coming to reality with their poor spending habits.

Ronald Reagan used the term “Trickle Down” economy, which basically means the same thing as buy now and pay later at astronomical rates. The 1980’s generation practiced this new philosophy and by the look of things it was passed down to the next generation.

Pay day loans came in to offer these distressed families who the banks and normal loan companies wouldn’t work with and gave them a new alternative when it came to getting a loan in a hurry, but of course it came at a very high price.

Some pay day loan companies finance rates were as high as 38.50% — on a 14 day loan. Over the course of a year that would be approximately a 988% APR. Such high rates make a 28.50% annual credit card rate appear generous – which of course it is not.

Pay day loans work like this; you bring in basic information such as a photo ID, for example your Driver’s License or State ID. You will need to show your Social Security Card’s and you are required to have a working telephone number that can be a land line or cell phone because with the majority of pay day loan companies, that part doesn’t matter. The other thing you will need is a piece of mail such as a utility bill that shows your current address.

While most Pay Day Loan companies will accept your most recent pay check as proof of income, other companies require you to have direct deposits of your check made to your checking account. While still other short term loan companies will only approve you for a loan if your employer verifies you are still employed, pay check in hand or not.

Competition has gotten so fierce that merely presenting a bank statement showing proof that you have an open account is all Pay Day Loan companies are looking at. It doesn’t matter if your balance is at a negative $500 or that you have had a hundred overdrafts within the last year you in most cases will still qualify for some type of loan.

Credit checks normally are not done when you apply for a Pay Day Loan so your credit history isn’t held against you. Some companies are members of a inner circle type of credit checking system that checks for bounced checks and how many other pay day loans a client has out. Too many of these types of issue can limit the amount of money you can borrow or disqualify you all together.

That’s really all the information most companies ask for and then are willing to loan a person as much as $1,500 on their promise to pay them back.

With all of these financial negatives in the pay day loan industry one might wonder how companies could ever make a profit, the answer is in their finances fees. Because pay day loan companies understand that they are mostly dealing with people with bad credit problems to begin their rates are based on what sector of the financial world they are dealing with. Because they don’t bother to do credit history checks, other than what is apparent on your bank statement this of course likely means they assume you are a high risk when you walk through their office door and thus even people with a great credit history who find themselves in a bind will see finances fees normally ranging from 20% per 14 days or about 588% annually, and these fees can go all the way up to 38.50% depending on the pay day loan company you’ve chosen.

Here is where this process can quickly become a “bear” for those who don’t understand the process. Pay Day Loans are not like bank loans or credit card loans where as when you pay that minimal fee some of it is applied to the principle. People expect that their minimal payments are working toward eventually paying the loan off, but this is not how pay day loans are set-up and people get confused.

Most pay day loans work like this; a loan with most companies is due in full on your very next payday. So for example, you took out a $1000 loan for 14 days and the finance charge was 20% for those 2 weeks. You would be expected to pay back approximately $1,200 on your pay day. This is to be paid in full or you are given only one other option and that is paying the current finances charge and then refinancing the loan toward your new pay day. Remember this loan was refinanced for the same amount of principle you started with so you would still owe $1,200 when your next pay day comes around. This could go on for months or even years.

Pay day loans over the Internet is a more convenient way to get access to these short term loans. Pretty much all online companies require that your paycheck is on Direct Deposit. You would fax in all your information to their office and you would be notified of your approval via email or over the phone. Either a check is immediately sent to you via courier or overnight service can be arranged for additional fees.

Many Pay Day Loan companies in the UK have recently begun to electronically transfer the money straight to your account. They also automatically deduct the minimal bi-weekly or even weekly finances charge from your account electronically. Online Pay Day Loan companies will continue to draw these fees from your account until you pay the entire balance off. So again, this could go on for months.

When a pay day loan company offer their clients up to 80% of their income it basically means your next “entire” pay check must go to that pay day loan company to get out of the loan. Most people can’t give up their entire check and still survive, thus they get trapped in a never ending cycle of paying finance fees one pay check after another.

All too often people go to pay day loan offices needing just a $100 or so to get by until their next pay day. When they are told they can get $800 people some unwisely take the money not really understanding how the pay back process works. To pay day loan companies due process, most instruct their Customer Service Representatives to explain the loan process to each and every client, but when people are in dire financial straights too often they’ll agree to anything to get themselves out of the immediate crisis only to walk into another and sometimes one that is far worse than they expected.

Pay Day loans can be the second chance haven for some people who find themselves in an emergency when there is no other financial company that will trust them with a loan due to poor past money managing. In fact, you can be late or don’t pay until it goes into collections and even then you can come back and get a new loan at most companies. They are very forgiving. Pay day loan companies can be a life saver if used properly. They can get you out of a sticky situation when you have no other alternative. Not all pay day loan companies work in this manner, the majorities do, but there are others who are more willing to work with their clients in pay these loans off in smaller increments.

When you find yourself in a financial crises and you find that a pay day loan is your last option don’t panic and go to the first office you see. Follow the rule of going through the process of comparison shopping as you should do with any financial purchase or arrangement. Find the best pay day loan offer that give you the best options on paying the loan back in a way that won’t hurt you to badly in doing so.

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When Will Prosper.Com Accept New Loans?

Prosper.com is one of its kind unique website that runs on the concept of providing loans by peer to peer lending. This concept involves people who wish to seek loans taking up a loan through the site from other people who are willing to lend their money at a certain interest rate.

Although the concept is novel, Prosper.com ran into problems and had stopped issuing new loans to loan seekers due to various reasons, one being the SEC wanting to check on its regulatory filing and the other being a slow rise in the number of defaulters.

This was a move that happened sometime in October 2008 and since April 2009 Prosper.com is back in business and is in the process of accepting new loans although it has significantly made alterations to the procedure being followed.