It is still legally possible to arrange a loan without collateral without proof of income, creditworthiness examination, and optimized tax return.
However, if this is to be possible under such conditions, the applicant for the loan must be a natural person. (enlightenment) or legal entity (sro, as etc.) and in addition to the loan money must be used for business purposes.
As you correctly understood, this would be a business loan without proof of income and mortgage. Here, the provider is still allowed from the point of view of the right not to examine the applicant’s income and creditworthiness.
However, for all (consumer) loans to consumers for purposes other than business, income must always be substantiated. It must also be sufficient (= adequate creditworthiness) given the obligations of the applicant and the future repayment of such loan.
If you still have the option to pledge real estate, it can mean more favorable loan conditions and the pledge can go both commercial and residential property. (ie any type of real estate) However, here too, the business / consumer loan with collateral applies similar rules (for the consumer it is necessary to address the applicant’s income / for the business not).
Loans on the non-banking market
The reality and practice of the business loan market is that:
Without a mortgage, there is no reasonable non-bank loan for entrepreneurs or consumers, and it does not matter whether proof of income is required or not.
Without pledge really not much except a few decent (large, well-known) non-banking firms, which lend hundreds of thousands at reasonable interest and longer maturity.
In any case, there must be proof of income, examine creditworthiness and% of approved, paid out of the total number of borrowers (throughput) is quite weak, for example, 10-20%.
The idea of a non-bank business that lends a consumer or non-bank loan absolutely without examining the registry (or just at random, randomly) or through its downright bad condition.
Who lends without having to provide income, requires sufficient creditworthiness from the applicant, or lends in combination to a bad register / good creditworthiness (provable income) good register / bad creditworthiness (or unsupported income).
It will probably remain a mere idea.
Because in reality, on the current non-bank credit market such a loan simply does not exist. At least not on April 5, when this article is written. It may occur at any time in the future and can be solved. It would be great news and we would immediately strive to have such a loan for our clients in the portfolio. With a smooth and efficient negotiation process.
However, the reality has always been that when such as a non-bank firm has appeared on the market in the past and was able to borrow up to USD 600,000 for interest up to 10% per annum for maturity for example 15 years with a worse register tolerance. Use the money from a loan for anything – often directly to consolidate all your debts. It was a big fuss, big expectations and a positive attitude the company “as it did not hit the black” received one client after another, the throughput was initially very good.
But then the situation evolved in a slightly different direction. He probably stopped (properly) repaying one client, then the second, third. The fourth declared insolvency and only about USD 150,000 was borrowed from the loaned USD 500,000. This makes a 350 thousand USD loss per client. Because it was without a collateral loan, the company often could not touch the property to recover money in the event of default of the borrower. And getting money back from a person who does not want to repay and has nothing written on it can be a big challenge.
This led to a decreasing optimism of a constantly larger selection, tightening of the rules for obtaining a loan, increasing demands on the overall parameters of the applicant (register, creditworthiness, his obligations), which continuously reduced the throughput. Which got in a relatively short time, for example, the 10%.
Thus, 2 applicants out of 20 total received the loan. Throughput (demandingness of negotiation – demonstration and fulfillment of individual requirements) thus practically reached the level of a bank loan.
When the company one day said that this really was not a good idea, and it may well be in a loss of such a business.
How does a business loan behave without collateral?
When we mention purely the business loan without collateral. It is ideal for getting it at the same time, under reasonable parameters and conditions, and to make it possible at all to “stretch, enforce” it in the banking sector.
For non-banking firms, lending to entrepreneurs is even more risky and apart from a few expensive entrepreneurs, they do not lend to all unless they are pledged.
In addition, any bank business loan will always be more profitable (and safer) than non-bank.
However, in the banking sector it is not possible to talk about a business loan without collateral and at the same time without proof of income.
Because in order to be able to arrange a loan in the banking sector without collateral for entrepreneurs (as well as consumers), each bank will want to at least see the applicant’s income, at least one tax return and the economic situation will have to correspond. to the required loan amount.
However, there is a difference when it is necessarily tabularly based on pure profit or it is necessary to start from the turnover.
There are more parameters that can be tolerated on the market of bank business (and consumer) loans without collateral. In either case, it is ideal if we can arrange a loan for the applicant in the banking sector.
We have good options in this respect, and if we succeed, there is the advantage of a loan for a client at a completely different level, and even the throughput needs to be better than those of a few non-banking firms.
But one has to have a good knowledge of the market and also know who to contact, a network of contacts. Which is not easy to get, but it is so. Today it is mainly about people.
What about a purely consumer loan?
As for the consumer loan without collateral (including collateral) and without proof of income, with insufficient creditworthiness. Thus, loans are those where the applicant for the loan is a natural person working or doing business but using the money for purposes other than business.
Here the income must always be provided by law and the creditworthiness (difference between the applicant’s income and costs) must be sufficient.
As I mentioned in this article. We are constantly conducting research on the credit market and it is really possible that a decent investor will again be interested in lending without collateral, both to consumers and businesses, under favorable and fair conditions and with good throughput. And that if that happens, not only will we keep our fingers crossed for it to keep it profitable as long as possible. At the same time, after verifying “cleanliness and security” for our inquirers, we will establish cooperation and offer this option to non-bank business (or consumer) loan to our clients. It is possible that the “rules of (credit) game” will change tomorrow. current information.
However, if the property is not pledged, I am afraid that the income will have to be documented at all times and the creditworthiness will have to be in a proper state, whether it is a loan without pledge of bank or non-bank property.
This is at least somewhat addressing the risk of future defaults. Because if the property is not pledged, the borrower must as much as possible examine the applicant himself to reduce the risk of future defaults and the problems involved. (ie its history = register, and creditworthiness = income and liabilities)
In other words, in addition to meeting the statutory obligations of a consumer loan, the borrower will also reduce the risk for possible future repayment of the loan. And so that they sufficiently verify the applicant for the loan – its income, liabilities (creditworthiness), history-register, and possibly the purpose of using the loan and more.
Because if the property is not pledged, how many times is it difficult for the lender to recover money in the event of a default on the part of the borrower.
Thus, by thoroughly scrutinizing the borrower, it will further reduce (treat) the risk (probability) that the client will ever be in a long-term delay with the repayment or even worse stop paying completely.