There was a time when bad credit was enough to end hopes of securing any loan large enough to make a difference in the battle against financial strife. But in recent years, getting large unsecured loan with poor credit scores has become a simpler and less stressful thing.
The reason is principally the attitude of traditional lenders towards poor credit scores. The economic crisis that has raged for almost 5 years now has seen many honest and reliable borrowers suffer unforeseen financial problems. As a result, the number of late payments and loan defaults has increased.
Getting large loan approval should be harder, but most lenders have recognized these problems as a result of circumstance rather than bad financial behavior. So, there is more attention paid to the other factors instead of credit history.
Therefore, having these aspects in good order is more likely to lead to approval on a large unsecured loan than anything else.
The Principal Areas of Concern
So, if not bad credit scores, what are the main areas that applicants should be concerned with? Well, there are basically two: having a reliable income, and a healthy debt-to-income ratio. When seeking large unsecured loans with poor credit, the risk factor for the lender is much higher, so it can take a lot of convincing to get the funds necessary.
A basic requirement for any loan is to have a reliable source of income. And reliable means a long-term, full-time employment agreement as opposed to a short-time contract, even if it is really well paid. Getting large loan approval depends on the ability to make the repayments for the duration of the loan term, whether for 24 months or 60 months.
The second issue to consider is your debt-to-income ratio, which relates to the share of income used to repay debt and loans. The set limit is 40%, so if existing debts are too high, then another large unsecured loan will be rejected.
What Security Is Possible?
The problem with applying for a large unsecured loan with poor credit is that, by definition, there is no collateral provided to help to convince lenders to grant approval. If there were, then it would be a secured loan. But there is a way around this issue: namely, a cosigner.
Cosigners act as guarantors for the loan, promising to make the repayments themselves in the event that the borrower is unable to. The benefit is not just that it is invaluable when getting large loan approval, but that the risk is removed so the interest rates fall too. As a result, the whole deal is more affordable.
However, not just anyone can become a cosigner. They need to have an excellent credit history, a low debt-to-income ratio and a sufficient income to make the repayments on a large personal loan, if that becomes necessary.
Which Lender To Go To?
Another issue that needs to be carefully considered is which lender to apply to. This can be the crucial matter when applying for a large unsecured loan with poor credit since the terms they offer dictate how affordable a loan deal is.
The best option is generally online lenders, who are famed for offering loans with competitive interest rates to applicants with low credit scores. The chances of getting large loan approval are much better too, since most of the online lenders specialize in lending to bad credit borrowers.
In particular subprime lenders, who offer quite flexible repayment schedules despite their relatively high interest rates. The longer term of their large unsecured loans lower the monthly repayments, though the amount of interest paid over the lifetime is much higher.