A loan without collateral is now rarely issued by the banks, since the risk of loss from a loan default does not justify the promised return in the long term. For this reason, it is increasingly difficult for a borrower to get a loan if it either cannot provide any collateral or the existing collateral is insufficient. The professional lenders base their lending on a few key points that the future borrower has to fulfill if the loan amount requested is to be approved.
The conventional collateral, which is usually queried by every bank and must also be provided by the borrower, includes the credit entry as well as the deposited creditworthiness, which must be proven by means of salary or wage statements together with account statements. Even a failure of just one of these securities can have a negative impact on creditworthiness, so that the application for a loan can result in a rejection.
Apply for a loan without collateral successfully
If the collateral is not available, the borrower is dependent on the successful application for a loan without collateral, at least if one does not want to collect additional collateral or even want to move to the private level. If the usual collateral such as credit entry or proof of creditworthiness cannot be provided, a loan without collateral can be avoided by simply offering the bank or another credit institution additional security that tries to compensate for the missing one. In the best case, this can be a property that currently does not generate any income, for example because the condominium is not rented out, but can act as a seizure fund. A guarantee can also convince a bank to ignore the lack of collateral for the actual borrower as far as possible and still issue the loan amount.
Both ways represent effective and sometimes successful emergency solutions, but they do not serve as a long-term solution to the problem and leave the root of all evils completely untouched. Regardless of whether the application was successful with additional collateral or the loan without collateral was issued on the basis of good relationships with the house bank, the borrower should subsequently improve his financial situation. If, for example, the credit entry is positive again, the internal ranking of credit will of course also increase in reverse. This not only enables creditworthiness, but also increases the possible loan amount.
No loan entirely without collateral
In any case, the borrower must be aware that a loan will never be issued completely without any security, as this would already contradict the basic economic idea behind the loans. The only way to get a smaller amount borrowed is on a private level through good relationships with parents or other family members who give loans on a sympathetic basis, but not on hard facts.
A loan without collateral does not have to be the end of the road in any case, especially if the loan is either vital or a promising investment for the borrower. This is also where independent advisors or intermediaries, or sometimes a quick credit comparison, help to get the situation under control. Such a serious loan is not possible without collateral, but you can increase your creditworthiness in the long term by keeping your collateral stable and intact.