Personal Loans Without Payroll: What Are They?
Loans without paychecks are a tool designed for all those who do not have a fixed salary , but who still have guarantees to offer lenders to obtain financing. These can be the most varied and range from the classic guarantors, to the presentation of the movement of your current account.
It should be noted from the outset that banks do not easily grant these loans , but that if they do, interest rates are quite high and the amounts of money granted are rather small. The reason for this feature is to be found in the high risk of the transaction to which the financial institution is exposed.
The subjects to whom these solutions are addressed are, however, those with good credit reliability, since compared to a few years ago, lenders have applied much stricter criteria for the granting of loans. For this reason it is almost impossible that they are granted to bad payers or to those who have been protested. Loans without paychecks can be disbursed by both banks and financial institutions.
To which subjects are the loans without paychecks addressed?
More specifically, the subjects who can apply for a loan without a paycheck are among the most disparate categories. Some of these are:
- Students : in this case we refer to the most deserving, that is to say those who have had a brilliant university career. Most of the time the loans are aimed at the purchase of material useful for the study and derive from agreements signed between banks and universities, to finance degree and master courses.
- Employees with a paycheck already committed: it may happen that an employee with a paycheck has other loans in progress which absorb between 35% and 50% of their salary. For banks, in this case, it is as if no wages were received. But there are some solutions that can be adopted to deal with this situation and that we will see in the course of this article.
- Unlawful workers: irregular workers are those who, while offering professional services, do not have any type of contract. Consequently, they do not have the opportunity to demonstrate with a document how the paycheck income received in the year. Also in this case there may be some tricks to be adopted.
- Self-employed : with this category, very similar to that of freelancers, we refer to electricians, mechanics, artists, etc., who by the nature of their work do not receive a fixed salary. These very often have all the credentials to apply for a loan.
- Young entrepreneurs : people under 35 are considered young entrepreneurs. Many credit institutions propose to finance the projects presented to them at subsidized rates, in order to create more jobs and to move the economy.
- Housewives : in spite of what you might think, in this case too you will have to present any document capable of demonstrating a fixed income that will have to continue for the entire duration of the loan.
- Unemployed : like housewives, the unemployed will also have to demonstrate that they can somehow cope with their debt.
As mentioned earlier, loans without paychecks will have lower interest rates than standard loans . This is because the risk margin to which the lending institution is exposed is much higher than usual, as the worker may not be able to meet his debt in the future.
Interest rates, divided between TAN (Nominal Annual Rate) and APR (Effective Year Rate), usually hover around 8% or 12% , against 6% or 7% of a normal loan. In any case, it is very important to make sure that the percentage remains below the wear and tear rate established by Bankitalia, which can be kept under control from the website of the institution in question or through the use of this free tool.
Furthermore, it is very probable that the bank will impose the subscription of an insurance policy which has a cost which in this case could be quite high. The insurance company will undertake to repay the capital to the credit institution, if the conditions that allow the person who requested the loan to meet their debt are missing. If the policy is mandatory, then it will be included in the APR, otherwise it will be counted separately. Even in the latter case, the bank may decide to “oblige” the customer to sign it.
In the case of loans without paychecks, we will have to pay close attention to the documentation to be submitted , since it is precisely on this that the success of the request depends. In fact, the documents with which we present our guarantees will be contained in the file that we will send to the chosen credit institution.
The documents to be attached vary according to the category to which we belong: for example, in the case of students, the receipts certifying the renewal of enrollment and passing at least half of the flat exams must be included in the file. Even in some cases a document certifying the passing of the course of studies with a mark of not less than 110/110. On the other hand, for housewives and self-employed workers, it could be useful to attach the list of movements in their current account, which will demonstrate that they can cope with the debt with the bank.
Personal loans without paychecks: alternative guarantees
As previously mentioned, granting a loan to those who do not have a paycheck is a high risk operation for all lenders, who do not consider customers falling into this category to be 100% solvent. So to “convince” the lender to lend the sum of money , we will have to present all the alternative guarantees that we have, to demonstrate to the bank the possibility of facing the debt that we are going to contract with her. Furthermore, we must keep in mind that the sum that the lender will want to offer us, will increase proportionally to the amount of revenue that we will be able to demonstrate.
The guarantee simply consists in presenting a guarantor (guarantor) to the credit institution. The latter will personally oblige the financial institution to return the amount of money loaned, should the debtor no longer be able to pay it. The guarantor must be considered by the bank to be a person with good creditworthiness and he must also present the documentation relating to his income. Furthermore, it must not have been reported to CRIF (Centrale Riscchi Finanziari) as a bad payer, but on the contrary it must have a good reputation.
Loans exchanged are a loan that provides for the payment of the installments through bills of exchange, to repay the sum due including interest to the credit institution. This solution was very popular years ago, but has slowly fallen into disuse.
In fact, since the “promissory note” is an enforceable title, this offers greater guarantees to the bank, which could begin to immediately seize the debtor’s assets for a value equal to that of the unpaid installment, without the need for an injunction order or of a sentencing sentence that would require a high expenditure of time and money by the financial institution.
But despite the guarantees, the banks do not willingly give the loans changed , as they have a much higher than average default rate. Furthermore, this solution is not very convenient, since it has really high interest rates. Also there is to add the mandatory insurance policy. These last two characteristics push customers to prefer alternative solutions.
Warning: bills of exchange are an executive title! If the installments of the loan are not paid, the creditor can send the bill in protest and proceed with the attachment of the assets.
Mortgage on the house
In the absence of demonstrable income, mortgaging your home could be a solution, but not for small sums. At first glance this may seem counterintuitive, but it is not so. If the value of the property is much higher than that of the debt contracted with the credit institution, the mortgage would be partial, which would make it difficult for the bank to repay the sum of money, much lower than the value of the property. In fact, in the event of non-payment, credit institutions cannot absolutely detect movable or immovable property that have a value greater than the sum loaned, including interest.
The mortgage on the house is instead an interesting solution for those over 65. For some time, those who are over 65 and need liquidity, could resort to a really interesting financial solution. This is called ” mortgage loan ” and allows the beneficiary to maintain ownership of the property and not to pay any installment to return the sum loaned, until his death. Subsequently, the heirs will decide whether to redeem the property, paying the loan out of their own pocket, or whether to transfer it to the bank to return the sum disbursed to the credit institution.
Warning: this loan is easy to obtain, but sums much lower than the real value of the property must be accepted.
Movable goods: the pledge
The pledge loan is perhaps the easiest way to get liquidity quickly of all. Many banking groups offer this solution which, however, unless you have small treasures, does not allow you to obtain large sums of money. The duration of these loans is approximately 6 months and consists of offering the credit institution of the movable property as collateral. These are usually jewelry or valuable furniture.
At the end of the contract, the creditor can return the sum of money plus the interest accrued up to that time to redeem his assets, or renew the pledge obtaining another six months of time behind the payment of the accrued interest only, or finally leave the objects provided as a guarantee at the pawnshop, which will resell them through a public auction. Any auction surplus remains available to the customer for 5 years, after which it will automatically belong to the credit group to which we turned. The most famous groups that offer credit on pledges are UBI Banca and Unicredit.
Self-employed workers will simply have to replace the paycheck with the Single Form (ordinary tax return form). It is advisable to present the Unico of the last three years, in order to demonstrate that your income has been regular and has continued over time.
To obtain a loan without a paycheck, it can be useful to show the bank that you are the beneficiary of some alternative annuity . This category includes monthly maintenance checks, rents deriving from the leasing of properties, or even profits deriving from a small capital that generates a constant return. In these cases we will have to demonstrate that the annuity, in addition to being sufficient to meet the debt, will continue until the end of the contract stipulated with the bank.
Personal loans without paycheck: possible alternatives
In addition to loans without paychecks, there are other solutions that could be adopted by individuals who need liquidity. Obviously we are always talking about small amounts of money with very high interest rates. But these solutions can prove extremely useful if the lender has rejected the application with which the real loan was requested:
The revolving cards
Revolving cards are a new financial instrument and differ from the classic credit card. The main difference is the high interest and the possibility of paying the entire amount financed at the end of the month, without paying it in installments. Once the due amount has been paid, it will be available again on our revolving. The credit of the card is usually not very high, and it is important to stay below this threshold to avoid running into the payment of the maximum overdraft commission which is usually very high.
Debt consolidation is a very useful financial tool for those who are part of the category of “employees with paychecks already committed” which we talked about at the beginning of this article. This financial product allows you to combine all the amounts due in a single monthly fee to be paid to the bank. The installment is designed to be lighter and more sustainable, thus disengaging part of the salary, which will again obtain the characteristics necessary to apply for a loan. Most of the time, the financial institution you have contacted automatically makes additional liquidity available to the customer. The installments relating to this sum will also be appended to those to be paid.
Loans between individuals
Loans between individuals belong to two categories, peer-to-peer which can be requested on the appropriate lending platforms and loans between individuals. In the first case, the portals themselves take care of crediting the sum to the debtor’s account and of paying the monthly installments to be paid. Loans between private individuals, on the other hand, simply consist of turning to known persons who will make us a generally non-interest bearing loan.
Student loans of honor are usually structured so that 60% of the total sum is non-refundable and the remaining 40% at a subsidized rate. A financing of this type, compared to others in the category “without paycheck”, is very advantageous. This is because the creditor institution will begin to collect the amount due only 1 year after the end of the course of study. This is a choice made by lenders to give children the opportunity to find a job that will allow them to honor their debt.
Honor loans for businesses
Honor loans for businesses are usually used to finance the startup of a startup. These are granted to under 35s and once again half of the quota is non-refundable. But it must be said that the calls for honor loans are few. To try to win it is very important to prepare a good business plan to present.
Beware of scams
The web is teeming with bogus ads that promise to lend large sums of money, with very low interest and few guarantees. We must always be wary of offers like these, since these are scams made by people who only want to get hold of our personal data. In fact, it is preferable to contact your bank or institutions that we know are safe.
How to choose the best personal loan
Although it may seem simple to choose the best loan without a paycheck, in reality it is not. This is because there are many variations in the game. First of all, it is very important not to be dazzled by high loan sums that we will hardly be able to return. On the other hand, it is also recommended to avoid engaging in small installments, which derive from small sums of money with very high interest rates. It is also essential not to provide all your assets as collateral in order to have a high loan amount. This is because we could run into unpleasant epilogues if we were unable to pay our debts.