Sunday, June 15, 2014

Getting Unsecured Personal Loans With Bad Credit On Affordable, Competitive Terms


There was a time when an affordable personal loan was really only something that applicants with excellent credit histories could hope for. The rest of us had to make do with expensive options that hardly made it worth the effort. But today, even when seeking unsecured personal loans with bad credit, there are affordable options to consider.

Unsecured loans are always going to be more difficult to get approval on since the risk to the lender is greater. This might rule out the chance of getting fast unsecured loan approval, but there are some lenders with more open lending policies.

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But there are several things that an applicant can consider when putting together their application that can greatly improve their chances of success. Even an unsecured personal loan can be secured if all of the necessary boxes are ticked.

Consider The Viewpoint Of The Lender

The best way to approach a lender is from their point of view. Often, those applicants seeking unsecured personal loans with bad credit submit their application and hope for the best, but by recognizing what it is the lender wants, a stronger application can be compiled.

The chief problem with lending without the benefit of security is that the entire risk is left on the shoulders of the lenders. As a result, even if the loan deal is proven to be affordable, they charge higher interest rates to protect themselves. When trying to get fast unsecured loan approval, this risk aspect can cause problems with lenders also reluctant.

First and foremost, a lender wants to know they will get their money back, and proving affordability is the best way to do this. To this end, there are several positive moves to make when applying for an unsecured personal loan.

Proving Affordability

Having a good salary is fine, but a lender needs to know that existing debt is not eating up your financial resources already. This is where the debt-to-income ratio comes into play, with its set 40:60 guide used by lenders everywhere. When seeking unsecured personal loans with bad credit staying within this limit is essential.

The debt-to-income ratio relates to the percentage income that is used to repay debts (40%), with the remaining left to meet everyday expenses and any unforeseen expenses that can crop up. It is designed to protect the borrower from falling into the debt trap.

Getting fast unsecured loan approval is easier when the repayments are shown to be clearly affordable, and the only way to do so is to stay within this 40% limit. The lender will calculate your current monthly debt repayments, add the repayment on the new unsecured personal loan, and check if it is less than 40% of your income.

Get a Cosigner

Arguably, the best move to make to get approval on an unsecured personal loan with bad credit is to add a cosigner to the loan application. A cosigner is an individual who guarantees that the monthly repayments will be made, and promises to step in to make them if the borrower is unable to.

The key advantage to finding a cosigner is that it effectively removes all risks relating to the loan. This means that the interest rate charged is lowered, lowering the chances of missing repayments as a consequence, and ensuring fast unsecured loan approval.

However, there are some conditions. A cosigner must have a very good credit history and have a large income so they can afford to make the repayments if the need arises. Once these conditions are satisfied, then the unsecured personal loan is set to be approved.


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