It is widely accepted that having a poor credit history means getting loan approval becomes pretty difficult. It is also accepted that the chances of a bad credit borrower getting a large loan without the benefit of any form security are next to nil. But the truth is very different. In fact, the chances of getting a $15,000 unsecured loan with bad credit are far from impossible.
Of course, having poor credit scores is not exactly helpful when trying to get a loan, but it would be a mistake to think it is the end to any chances. Approval with bad credit is possible because the key factors have little to do with scores and ratings.
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What lenders want to know more than anything else is that the applicant is able to make the repayments, and for the duration of the loan term. It all comes down to whether or not the loans are affordable - when it comes to unsecured loans this is especially important.
The Factors That Take Precedence
So, if low credit scores are not the most important thing, what is? As already mentioned, affordability is the key, so the strength of the application for an unsecured loan with bad credit is based on the ability to convince the lender that that is the case.
Affordability rests on two particular factors, and these are what take precedence over everything else. The first is employment status, with applicants needing to show they are in full-time employment, and have been for a period of at least 6 months, before they can have any chance of securing loan approval with bad credit.
Obviously, the size of the income is important too, but not when measured against the debt-to-income ratio. If the amount of existing debt is already high, the monthly repayments are set to be high too. And with the ratio stating that no more than at 40% of income can be used to repay loans, approval of the unsecured loan depends on keeping within that limit.
Offering Loan Security
Even if the loan is proven to be affordable, and the repayments fit within the 40:60 debt-to-income ratio, getting an unsecured loan with bad credit may require something more. Many lenders look for some kind of assurance. Collateral is not possible as the loan is unsecured, but a cosigner can be used to provide backup.
Basically, a cosigner is a guarantor who promises to make any monthly repayments that the borrower is unable to make. This means that the lender can be assured that there will be no missed repayments and with the risk element all but removed, getting loan approval with bad credit becomes probable.
However, be aware that the lender has to accept the proposed cosigner on an unsecured loan. To be accepted, the cosigner has to have an excellent credit history and a large enough income to be able to make the repayments.
Choose The Lender That Is Right
When it comes to seeking a large unsecured loan with bad credit there are plenty of options to select from. However, it is important to find the right one offering the right terms. That way the loan remains affordable.
The choices are traditional lenders, online lenders and private lending firms. Of the three, online lenders are the most suited to bad credit borrowers, as their term are the most competitive. Interest rates are lower than both of the alternatives, while approvals with bad credit are likely as they specialize in bad credit lending.
Private lending firms are more expensive, but are a viable option when the required unsecured loan sum is very large - as high as $25,000 (secured loans can be much higher). These loans are affordable because the loan term is extended to the maximum, thereby keeping the size of the monthly repayments low.
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