You wouldn’t necessarily be wrong to assume that taking out a loan requires owning a bank account. Most lenders, after all, pay with direct-to-account deposits, want to see some form of credit history, and need to see proof employment. But there are some types of loans that even people without an account can take advantage of, though there aren’t that many available.
Put Up Collateral: Secured vs Unsecured
Unsecured loans require the most risk on the part of the lender, which is why they’ll want to see some sort of proof of your ability to make repayment. This means they’ll want to see your credit score, credit history, proof of employment, proof of income, as well as your bank statements. Then, an underwriter will weigh up whether or not you can be trusted.
If you’re applying for a loan without a bank account, you’ll most likely have to take what’s known as a secured loan. This is your way of providing a tangible guarantee that should you default on payments, you’ll have proposed assets in place to hand over ownership of. This would be a car in the event of an auto title loan, for example. Ideally, if you need to borrow money, you’ll have an account in place because without one, your options are very limited.
The Types of Loans You Can Apply For
Auto Title Loans
As briefly detailed above, auto title loans are a form of secured lending that require putting the vehicle you own up for collateral. You’ll be allowing your lender to put a lien on your car, which if you’re strapped for cash, can be one way to gain quick access to funds.
Like a lot of loans that apply to people without a bank account, they’re certainly not the safest way to borrow. Should you default, you’ll end up losing your vehicle and won’t get the value that it’s truly worth. Plus, if you haven’t paid the full vehicle off, you’re still on the hook with the auto financier. The rates and fees on this type of borrowing are typically way higher than average.
Pretty much every adult is familiar with the concept of a pawn shop. You take in your goods, you’re offered a less-than-reasonable loan based on its value, and you have a certain amount of time, typically 30 days, to return the money. Failing to do so will see the shop retain ownership of your asset.
It’s generally not advisable to use these services though it depends entirely on how much you need the cash and how convinced you are about your ability to pay them back.
The payday loan industry arrived quickly and thrived off the personal misery it caused for years until regulation came into effect. While many were forced to close shop, there’s still a large number of them on the market today.
Payday lenders usually give around 30 days to repay the original loan amount along with huge amounts of interest. This, in some cases, can be as much as 400%.