Once upon a time, the influence that bad credit ratings had over a loan application was pretty significant. But in recent decades the situation has changed, mainly due to the number of people who have been tagged in the category. But it has created a niche area, and there are now lenders who specialize in lending to applicants seeking unsecured loans with bad credit.
The niche has come to be because unlike in previous times when poor financial practice and foolish squandering led to financial problems, now the markets have steadily claimed honest borrowers. And since so many of those categorized as bad credit borrowers are honest, granting approval with bad credit is less of a risk than it once was.
Of course, despite the willingness to approve unsecured loans, there are no guarantees involved and applicants must satisfy a litany of conditions and criteria. But it is worth noting that certain elements of an application have a greater influence over the chances of getting a green light.
Factors That Best Influence Approval
For those bad credit borrowers seeking a loan, there are many issues that can ruin their chances of success. But the fact remains that getting an unsecured loan with bad credit if the lender is confident that repayments will be made every month without fail.
Providing this confidence comes down to two areas: employment and income security; and the degree of existing debt. Between the two of them, the applicant can confirm that the loan is affordable and, therefore, secure approval with bad credit.
In terms of employment and income, the two are obviously linked with lenders wanting to be sure that the applicant has the means to repay the loan. In most cases, lenders insist that the applicant have a full-time job, and have held it for a minimum of 6 months.
The amount of existing debt has a direct effect on the amount of excess income available with which to make repayments. It may be an idea to clear one or two minor debts before applying for a larger unsecured loan.
Offering Security For Approval
There are obvious risks when granting an unsecured loan with bad credit, with the lender effectively asked to accept all of it. The result is not only that approval is more difficult to get, but interest rates are going to be higher too.
Offering some kind of security is the solution, with secured loans generally more likely to be approved. However, in order to get approval with bad credit on an unsecured loan, it is worth including a cosigner in the application. This greatly enhances the chance of getting approved because the cosigner basically guarantees that the repayments will be made.
However, be aware that for a cosigner to be acceptable to a lender, he or she must have an excellent credit rating and a healthy enough debt-to-income ratio to permit the repayment on the unsecured loan in the event they have to act on their promise.
Opt For An Online Lender
There is no shortage of loan sources to consider, even when looking to get an unsecured loan with bad credit. But arguably the best option is the online lender. Recognized as expert lenders to the bad credit borrower niche, they offer terms that make such loans more affordable.
Interest rates are kept at a competitive level, but the real advantage is that the monthly repayments are kept lower than traditional lenders could ever offer. This is done by extending the repayment term, thus dividing the loan principal into more (and smaller) monthly sums – something that is ideally suited to those seeking loan approval with bad credit.
Once the loan repayments are proven to be affordable, it is difficult for lenders to reject the loan application. So, even a large unsecured loan can be granted.