What is referred to as a tenant loan is basically one that is not secured by any collateral, such as when a person has to put their home, automobile or other tangible items on the line to guarantee it will be repaid. These particular loans are basically available to anyone in the market to borrow, if they can negotiate a deal with the lender. Oftentimes, the borrower will be someone with bad credit and/or other negatives in their credit history that may make them a less than desirable risk for consideration by most. However, certain bad credit lenders will be willing to take the calculated risk knowing they can charge the borrower a much higher than normal interest rate.
As with most situations involving agreements between two parties, there are positives and negatives on both sides to be weighed. From the borrowers side, on the positive side, they are able to obtain a loan without needing to put anything up to guarantee it. In addition, these loans fall under legislation that allows them to pay back the loan at any time should circumstances change and they are able to. They would not be subject to any pre-payment penalties or charges. On the down side, repayment schedule will run on a much reduced time pattern then secured loans, which combined with the higher interest rates imposed will make for substantially higher monthly payment amounts due. Also, in most cases the amount available to be borrowed is usually not a particularly large amount that someone with good credit and security might seek. And technically, the money is not to be used for any sort of business investment or other that would put it at risk. In most cases however, once the loan has been granted, there is little follow up done on the details of how it is used.
From the lender’s side of the ledger, if they determine that this borrower is a good risk to take, they stand to make a substantial profit on their investment in a reasonable period of time. How they arrive at their decision of who and why someone is a good risk to take a chance on, is unique to each person making that choice. But for the most part they will look into things like where the person works, how much they make at the job, and a tracking of a stable work history. They will probably investigate their steadiness in terms of where they live and whether or not there is a pattern of constant moving from place to place. They are basically looking for signs of stability in a person who had some sort of unfortunate experience that left him with a less than satisfactory credit rating.
So as can be seen, there are certainly reasons for both parties to seek and cement a deal. In many cases, the meeting of the principals involved and how they feel about each other, will go very far in deciding what will happen.
Unsecured Loans