4 Questions to Ask Tenant Loan Lenders

A tenant loan is essentially a personal loan for a someone who does not own property. A home owner typically has the option to use home equity as collateral for personal financing options. A tenant does not have this same option, so a tenant must seek loans without collateral. There are a number of lenders that provide for the use of tenant loans, including banks, online lenders and alternative lenders. Some of these loans will be better deals than others, and it is important to ask questions about the loan contract to see if you are getting a good deal.

#1 Can My Rate Adjust?

Unsecured loans are more likely to be issued at adjustable rates. Most lenders will be up front about the rates on a loan, and it should not be hard to find out whether the rate is fixed or variable. The harder thing to discover, though, is when a rate may adjust if the loan does have a variable rate. Lenders may make it seem like rate adjustments are highly uncommon as long as you pay your bills on time. However, this is rarely true. Find out the specific rules regarding when and how your lender will adjust your rate.

#2 Can the Loan Be Canceled?

Some tenant loans are distributed all at once, but others are distributed on a monthly or weekly basis. Tenant loan lenders may allow for a revolving credit line, like a home equity line, that allows you to take funds as needed from an account and repay those funds when able. This type of loan is very stable when secured against home equity. Tenant lenders have more at risk, though, and they are more likely to cancel the loan and ask for repayment in full if they fear you are at risk of default.

#3 Can the Loan Be Called In?

When a tenant loan lender cancels a loan, the lender may ask you repay the entire sum immediately. This is termed "calling in" the loan. Most ethical lenders will not take this step all of a sudden, but some do so. It is a particular concern if you are facing financial woes, like a job loss. The lender may become scared you will begin defaulting on your debts. The lender will want to get paid before any other creditor you have, so they will immediately call in the loan and ask for full repayment.

#4 What Penalties May I Face?

Tenant loans are more likely to come with penalties for breaking terms. Late payment fees, prepayment fees, modification fees and other penalties may apply to your loan. Ask the lender for a run down of these fees so you can understand just how flexible your loan really is. In most cases, these loans are not flexible at all, and you will find yourself locked into very strict terms from the beginning. Consider these terms when you are comparing the cost of a tenant loan to an alternative option like a credit card or charge card.