Character Loan


DEFINITION of 'Character Loan'

A character loan is a type of unsecured loan that is made on the basis of the borrower's reputation and credit. Borrowers are typically able to obtain only small loans by this method, since if the borrower is unable to repay the loan, the bank will most likely encounter considerable difficulty in recovering the loaned funds. This is in contrast to secured or collateralized loans under which repayment of the loan is secured by a valuable piece of property or equipment.

BREAKING DOWN 'Character Loan'

A common example of a character loan is a credit card. Before obtaining a credit card, the issuer checks the borrower's credit report (i.e. character), and determines how likely the borrower is to repay the loan. The issuer then decides on how large of a credit line (i.e. loan) it will allow. Borrowers with poor credit or no credit may be unable to obtain a credit card, or may be extended only a very small credit line.

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  1. Are personal loans tax deductible?

    Interest paid on personal loans is not tax deductible. If you take out a loan to buy a car for personal use or to cover other ... Read Full Answer >>
  2. Does the Walmart credit card have an annual fee?

    The Walmart credit card does not charge annual fees to its cardholders. It does, however, have other fees associated with ... Read Full Answer >>
  3. How do NetSpend cards work?

    NetSpend prepaid MasterCard and Visa cards are popular prepaid debit cards requiring no minimum balance and no credit check. ... Read Full Answer >>
  4. Can the Best Buy credit card be used anywhere?

    The Best Buy credit card can only be used in Best Buy stores and when making purchases online through the Best Buy website. ... Read Full Answer >>
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    The CareCredit card is accepted only at select Rite Aid pharmacy stores in the states of New York, Pennsylvania and Maryland. ... Read Full Answer >>

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