Saturday, June 14, 2014

Getting $20,000 Unsecured Loan With Bad Credit: 3 Factors Approval Is Decided On

Having bad credit scores does not help when it comes to securing loan approval, but it would be inaccurate to claim that they also end any chances of getting the thumbs up from a lender. The simple fact is that it comes down to the overall strength of an application, so it is possible to get even a $20,000 unsecured loan with bad credit.

But what exactly is needed to make an application strong enough? There are several factors that lenders look at with interest, with credit scores only of minor interest. They are much more interested in establishing that repayments are both affordable and reliable, so getting loan approval with poor credit histories is not such an impossible feat.

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Of course, knowing what these significant factors are is a big advantage when it comes to putting together a strong enough application to get a large unsecured loan. Below, is a shortlist of just 3 of the most important factors. Get this right, and the chances of a successful application are extremely good.

1. The Loan Sum

There is no denying that getting a $20,000 unsecured loan with bad credit is a lot more difficult than getting a $5,000 unsecured loan with bad credit. The main reason is that lenders stand to lose out to a greater degree should the borrower default, but the risk of default is greater too since the size of the monthly repayments is so much more.

It all comes down to the amount of excess income there is to commit to repayments. With the debt-to-income ratio restricting the share of income for debt repayments to just 40%, the larger the loan the less likely the repayments can be afforded.

Remember, securing approval with poor credit histories means some extra convincing is needed. So, calculating the actual repayment that is acceptable will help gauge the size of the loan that is most likely to be approved. Basically, do not seeking a large unsecured loan if it is not really necessary.

2. Signs Of Score Improvement

When lenders assess an application for a $20,000 unsecured loan with bad credit, they look for indicators relating to the direction the applicant is going in. Basically, is the credit position of the applicant getting stronger or weaker?

It stands to reason that lenders are more likely to grant loan approval with poor credit histories to applicants who are recovering their credit reputation, and strengthening their position than to those who are going in the other direction.

Improving your credit score will help indicate this. Using a small personal loan to clear one or more debts in advance of seeking a large unsecured loan can be very helpful. It sends the right signal, improves the score, lowers the interest rate charged and, consequently, the monthly repayments.

3. Increase the Loan Term

Since proving everything is affordable is the main secret to securing loan approval, finding a way to make it so is very important. When seeking a $20,000 unsecured loan with bad credit the difference that a small increase in credit score has can be minimal, but extending the loan term can be more beneficial.

With a longer repayment term, the size of the monthly repayments is reduced drastically. This is because, with more months to divide into the principal sum, the share in each repayment is smaller, and as a result, the chances of securing approval with poor credit histories are greater.

For example, with a $20,000 repaid over 3 years, the borrower will face 36 monthly repayments of $555 (interest not included). Over 5 years (60 months), the figure falls to $333, while over 7 years (84 months) it falls to $238. Just remember, the interest paid on a large unsecured loan over a long term is going to be greater.

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