Today, getting approval for any size of unsecured loan with bad credit can be difficult. This is because traditional lenders, like banks, have adopted strict lending policies, applying something of a credit squeeze by making the requirements for qualifying more difficult to satisfy.
Of course, there is no great shock in this. Stricter requirements are designed to protect the lenders from the kind of losses they have suffered in the economic crises of the last few years. And of all the loans on offer, unsecured loans carry with them the greatest risks. So, higher interest rates are to be expected.
Fortunately, there are lenders who are willing to grant loan approval despite poor credit scores, and with terms that are affordable for bad credit borrowers. These lenders are commonly known as private lenders, and they offer some genuine advantages over the traditional lender options that exist.
Finding a Private lender
Admittedly, there are a multitude of private lenders in operation, and the best resource to use to find the most suitable for your loan application is the Internet. Of course, there are risks to approaching lenders online, with many unscrupulous operators found there. And when seeking an unsecured loan with bad credit, further complications are the last thing needed.
That is why it is a good idea to check the reputation of any lenders that seem to offer a good unsecured loan deal. The Better Business Bureau provides a grading system that is based on market performance, with any complaints against businesses noted and influencing their grade. Be sure to settle for no less than A+ grade private lenders.
And, as always when considering financial products, be sure to read the small print of any loan agreement to ensure there are no hidden fees lurking. Getting loan approval despite poor credit scores can be reason for celebration, but the celebrations will be cut shot when the unforeseen expense creates unwanted pressure.
Improving Your Approval Chances
If an applicant’s income is relatively low, proving that a loan is affordable can become a challenge. This can cause real problems when trying to get an unsecured loan with bad credit. But by enlisting the assistance of a cosigner, the chances of securing a large sum loan are greatly increased.
What must be remembered, however, is that a cosigner must have a large income and have an excellent credit rating to be considered acceptable by the lender. After all, the cosigner is a guarantor, so must be able to afford the repayments should the borrower fail to make them.
A lender that grants a $25,000 unsecured loan will expect the borrower to have a large income too (perhaps $75,000), and for smaller loans of $2,000 to $5,000, as much as $40,000. However, to get approval despite poor credit scores on a loan of more than $25,000, a cosigner is almost a must.
Qualifying For An Unsecured Loan
There is no great trick to qualifying for a loan, and when it comes to applying for unsecured loans with bad credit, none of the criteria can be considered a surprise. Applicants must be over 18, be citizens of the US (or legal long term residents), and have a reliable source of income.
However, the issue of bad credit can be a problem if it is very low. Bad credit scores range between 550 and 700, with anything lower considered very bad. But many lenders are reluctant to grant loans to applicants with less than 620. So, getting approval despite poor credit scores can be difficult.
It might, therefore, be worth taking out some smaller loans to clear some outstanding debts, and in that way improve your credit score before applying for any large unsecured loans.