When we think about it, it should be next to impossible to get an unsecured personal loan with bad credit. The reason? There are 2 negative elements working against the applicant: a poor credit history and an application that has no security to back it up. But strangely, approval is possible.
There is a simple reason to explain why this is the case. Basically, there are more significant aspects to a loan application than the credit score, so approval is always a possibility. But even getting approval without security is not nearly as tricky as some would claim.
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It is important to note that the terms and conditions associated with any loan product may look complicated, but they are rooted in the simple fact that lenders want to feel confident they will get their money back, at a profit. Convincing them that this is the case inevitably leads to securing even an unsecured personal loan.
Submitting A Convincing Application
So how is this accomplished? Well, it all comes down to the strength of the application submitted. Ensuring it is strong and ticks all the required boxes is important. But getting an unsecured personal loan with bad credit needs a little more than simply meeting the basic criteria - that is, being over 18, a US citizen and having a reliable source of income (employment).
Getting a lender to grant approval without security takes satisfying their concerns over income and affordability. This relates to the reliability of employment, of course, but also the amount of income that is free to commit to repaying a new loan.
In essence, it is the debt-to-income ratio, which stipulates no more than 40% of excess income can be used to repay the unsecured personal loan, that really dictates the fate of the application. Remember that the interest rate charged with unsecured loans is higher too, so this affects affordability.
Choose Your Lender Wisely
A mistake that many people make is to take no care when it comes to choosing who to apply to. Most of us think immediately of our local bank before any other option, but there are better options elsewhere. Getting unsecured personal loans with bad credit often comes down to the smallest details.
Choosing your lender carefully also helps when trying to construct an application that meets specific requirements. For example, some lenders expect security to be provided, so there is little point in trying to get approval without security. Different lenders have different criteria, so choose the one whose criteria can be met.
The fact is that alternative lending sources are often the most practical, offering lower interest rates and better lending terms. But your local bank can sometimes prove to be the best option, and be more open to granting an unsecured personal loan.
Alternative Loan Sources
So, what are the alternative sources that are worth looking at? The vast majority of them are to be found on the Internet, where online lenders offer the most competitive terms to even to those seeking unsecured personal loans with bad credit.
These are specialist bad credit lenders, who operate in a niche market that traditional lenders are reluctant to cater to. As a result, their loan packages are tailored to meet the needs of bad credit borrowers, or those with acute financial problems.
Granting approval without security is an everyday event for them, and they frequently carry out no credit checks on applicants - though this generally relates to the size of the loan. Still, an unsecured personal loan is much easier to get from an online lender.
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