This type of consumer credit provides for the disbursement of a sum of money without the presence of a paycheck and the transfer of the fifth.
This does not mean the absence of a guarantee on the return of the sum granted, since no one would grant a sum of money without being sure of recovering it. The subjects admitted to apply for this form of financing are, for example, housewives, the unemployed, young people, self-employed workers and taxpayers.
Given the absence of a paycheck, we can speak of small loans, since greater financing requires an equivalent guarantee. In this case we could talk about the mortgage on a property, so the bank would grant a higher loan having a better guarantee from the sale to the enchantment of the property.
Usually the amount of the amount disbursed is less than 5,000 USD, being that the bank or financial institution does not want to incur too many risks by granting the loan.
The fundamental elements for the granting of this consumer credit are the presence of a guarantee and the absence of protests or the evaluation of a bad payer. In the latter case it is almost impossible to get a loan.
The guarantees admitted in the loan without paycheck
As discussed, the loan is not granted in the absence of a return guarantee. To obtain the disbursement, it is necessary to reassure the bank or the financial company, who can thus be sure that the amount disbursed will be returned.
Common modes are as follows:
- Guarantor: we are talking about a third party who undertakes to guarantee the repayment of the loan without a paycheck, personally engaging with its assets. In fact, in the event that the debtor does not fulfill the obligation assumed in the contract, the guarantor will pay. It is necessary that the latter is not reported to the Crif as a bad payer, moreover the loan is not granted if the applicant does not demonstrate that he has a fixed income. In fact, the security of a third party who undertakes to pay the contracted debt is not absolute;
- Loan changed: the monthly loan is paid through the bill of exchange. It is an enforceable title that allows the bank or financial institution to execute the foreclosures of the debtor’s assets even in the event of non-payment of an installment. This form of guarantee is not very widespread, because a bank could very well not recover the sum disbursed from the attachment of the debtor’s assets. In addition, the applied to these loans is very high, providing high interest together with the costs of the insurance policy requested as a condition for the disbursement of the loan;
- Mortgage on the house: this form of guarantee provides for the opening of a mortgage on a property owned by the applicant. This guarantee can hardly be used in the case of small loans. In fact, the costs and conditions become unfavorable to the bank, which prefers to grant a larger loan in exchange for a mortgage guarantee. To add that it does not always happen that the bank manages to recover the amount disbursed and the expenses incurred, due to the problems related to the current condition of the real estate market. There is a possibility of a lifetime mortgage loan, in case the applicant is over 65 years of age. Upon the death of the debtor, the heirs can choose to pay off the debt or sell the property to return the money to the bank;
- Guarantee pledge: this form of loan provides for the sale of an asset in exchange for the disbursement of the sum requested. This form of financing is mainly used in the case of an urgent need for liquidity and usually concerns gold objects or jewelery;
- Alternative annuities: this form of loan provides a guarantee on a form of income different from the paycheck. The typical case concerns a divorced wife who receives the maintenance allowance from her husband. In this case the bank or the finance company grant the loan by calculating the monthly installment in relation to the maintenance allowance. Another example is the case of an annuity obtained thanks to the rent received for a property, which constitutes the guarantee requested by the grantor of the loan. In both cases, the limit of the minimum income connected to the poverty line is set, so the remaining part is that which the bank or financial institution will evaluate as the amount of the monthly installment;
- Single Model: another case is that of the self-employed worker who obviously does not have a paycheck to show for the loan. In this case, it is necessary to demonstrate an income through the Single Model, preferably by submitting the documents relating to the three years preceding the loan application. This is in order to guarantee the bank or financial institution to have continuous income to guarantee the repayment of the loan disbursed.
This form of consumer credit is not very convenient in terms of the interest rates applied. The risk associated with the granting of this loan pushes to apply a high , even of 12% in some cases. This condition is connected to the situation of the applicant who offers income guarantees other than the determined paycheck
the application of unfavorable contractual conditions dependent on the insolvency risks faced by the bank or the financial company. It is important for the applicant to always check the interest rates applied, since it is not unusual for them to weigh higher than those established by the Bank of Italy as usury rates.
It is also necessary to check ancillary costs, such as management and administrative costs, but also related to the insurance policy.
How to choose the loan
In order to make a correct choice, it is necessary to evaluate above all some aspects related to the loan, as indicated in the previous paragraph. They are:
- TAN: is the Nominal Annual Rate, is the interest rate to be paid to the bank or financial institution. Usually, loans without paychecks have a high TAN, so this is the first parameter to evaluate. A low TAN compared to the market average is certainly favorable;
- APR: it is the Annual Global Effective Rate, i.e. it is the index of the costs that concern the loan. They include interest and the compulsory insurance policy. The lowest APR is an excellent element for choosing the loan;
- Insurance policy: in order to obtain a better guarantee on the repayment of the loan, the bank or the financial company can demand an insurance policy in the stipulation of the contract.
In the absence of payment by the debtor, they can have the loan repaid by the insurance company. If the compulsory policy is mandatory, the price is compressed in the APR. If it is optional, it must be indicated when the contract is signed and the cost will be calculated separately.
Some alternatives to loans without paychecks
Personal loans without paychecks are difficult to obtain, and they are also subject to often unfavorable or difficult to meet contractual conditions.
An alternative are the revolving cards that allow you to make purchases in installments. Of course, this bank’s grant of a credit line involves the payment of interest, but it is always a form of credit different from the loan without a paycheck. There are also small loans with an amount less than or equal to 3,000 USD, but the interest rate applied is very high, a situation that often distracts from requesting them.