More lending, particularly in the form of unsecured tenant loans, is possibly not the best thing for the economy. Last year, according to Shelter, a UK based housing charity, a million home owners used credit cards to help pay for their mortgage. It is of course no surprise to anyone now that lending has surpassed reasonable levels in recent years, particularly lending of a fairly irresponsible nature. Many home owners have opted for an interest only mortgage in order to reduce their monthly outgoings, and many more are frequently supplementing their income by putting much of their spending on their credit cards. Debt, it seems, has become something of an unhealthy trend for this generation.
Why now though? Surely banks have always lent people money, and today they have access to a whole lot more information about potential borrowers than ever before. The mortgage rates current trend is thankfully fairly favorable to home owners, but many are still having difficulty keeping up their payments, often opting to refinance their home to ease their financial burdens. It is not only home owners who have been struggling as unsecured loans for tenants have also been on the increase.
The obvious difference between today and less debt ridden days of old is the abundance of lenders and ease with which you can borrow money. For someone with a regular source of income and a healthy credit history a plethora of introductory offers and incentives are provided along with an often substantial pre approved credit limit. Most now offer interest free periods to entice new customers and minimum monthly payments which are a tiny fraction of the total balance. All this may sound great while you figuring out if you can afford that awesome new patio furniture or to replace the old Flymo with something a little more powerful like a petrol lawnmower, but these incentives make it easy to forget that at some point this debt will need to be repaid.
Unsecured tenant loans are probably a better option in the sense that they are typically for an agreed amount that the tenant, if they are behaving responsibly, will have total confidence in their ability to repay. Probably the most dangerous thing about a credit card is ease and speed with which you can accrue large sums of debt, and this often because of the ongoing nature of the credit arrangement. The minimum payments will keep many from clearing their balance, and so they will remain customers for months if not years longer than perhaps originally intended. As long as they keep to their agreed payments the credit card company will generally increase their balance, and inevitably this leads to large amounts of interest added to the debt. A tenant loan is a once only arrangement and it is a safer option for this reason.
It’s not just the credit card companies who are seemingly throwing money at the unwary consumer. It is often more convenient to take the new living room furniture or bedside cabinet home now and pay later, and furniture stores have no qualms about making it as easy as possible for customers to purchase their products. It is true that they will in many cases offer interest free credit and most people will pay before this period is up, but many will simply transfer this debt to their credit card rather than actually pay for it. The main problem with paying for something at some point in future is that the future is uncertain, and any number of circumstances could affect your ability to clear your debt. If you cannot afford something now, can you really be so confident that you will be able to afford it later? It is with this easy kind of credit that many people have become buried in unmanageable debts leading to a severely damaged credit rating and in some cases bankruptcy. Tenant loans can actually be good alternative to would be borrowers in this situation.
For those with bad credit tenant loans are often the best option available and, although they will most likely cost more than the equivalent secured loan, they do have a number of benefits.
1. Tenant Loans are fast.
If you need money quickly then a tenant loan is a good option. Usually a loan of this kind can be completed and the money cleared in your account within one day, which can be a great help in an emergency.
2. Tenant loans have a simpler application process.
Usually one online application is all that is required unlike secured loans, where documented proof of the assets used for collateral is normally needed.
3. Loans for tenants with bad credit are available.
Bad credit loans for tenants are available which, though the interest may be charged at a higher rate to compensate for the increased risk to the lender, do provide help for those who have been refused by banks and credit card companies.
Probably the most beneficial thing about tenants loans for people with bad credit is that they provide an opportunity for the borrower to repair their credit rating. It is a vicious circle that those with a poor financial track record are unable to obtain any credit, and therefore unable to build up the evidence required to repair their rating. Many will apply periodically for loans or credit cards only to be declined, which further damages their rating.
With tenant loans the chances of approval are much greater than the usual alternatives, and it is possible – provided any agreed payment deadlines are met, and the full amount of the loan is repaid within the agreed term – for the debtor to build up the essential evidence of responsible borrowing and debt management required to improve their credit score. With improved credit there can eventually be opportunities for cheaper credit and these, so long as they are managed effectively, will in turn improve credit rating. However beneficial they might appear while you are considering replacing the dining room table or getting a bigger coat stand, you should remember that tenant loans are still a form of debt, and If you can’t afford it now… You know the rest.
{ 1 trackback }