Do You Need Collateral to Get a Loan?

Payday loans are an easy and efficient way to get your hands on needed money quickly. Instead of filling out several conventional loan applications at credit unions or banks and waiting for weeks or months to get the cash you need, you can fill out a short, online application for a payday loan and receive your funds in as little as one day. As an additional boon to many, your high or low credit score is not a factor in considering whether or not to offer you a payday loan.

What is Collateral?

Collateral is a security of some object or item that you offer to a lender if you default on a loan. The most common types of collateral loans are car loans and home mortgages. In these loans, the car or the house serve as the collateral to secure the loan – if you do not pay the loan off or default on it, the bank can take them away from you and attempt to sell them to recoup their costs for the loan to you. Some payday loan lenders today offer loans in greater amounts if you are willing to put up your vehicle as collateral for the loan – again, risking the loss of the car if you are unwilling or unable to pay back the loan according to the terms you sign up for.

Is Collateral Necessary?

For most payday lenders collateral is not necessary to secure a loan. Lenders and loans that require collateral for a loan (such as your car’s “pink slip”) are quickly losing popularity and fading into obscurity. The amount of a payday loan that you are able to borrow is determined primarily by:

• Your income: The primary determining factor for a payday loan is simply how much income you have and your likelihood of being able to repay the loan amount and the loan fee.
• Your state laws: State laws dictate just how much any of its citizens are allowed to borrow as a maximum.
• Your history with the lender: Many lenders offer loyalty incentives for borrowing with them multiple times – thus the more times you return to receive a payday loan, the more you will be allowed to borrow, up to a limit set by your income and the state laws.
• Any other loans you may have out: Payday loan lenders have a way of checking to determine if you currently have any active loans out with other payday lenders. If you do, they may not lend to you at all or may reduce the amount that they are willing to give to you.