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Securing A Large Unsecured Loan With Bad Credit: The Key Factors Lenders Look At

For those of us with poor credit ratings, the idea we can get an application for an unsecured loan approved seems unlikely. How much more unlikely then the hopes of getting a loan of $20,000? But it is possible to get even large unsecured loans with bad credit, provided the application is solid.

There are a number of reasons why a lender would be willing to grant approval with bad credit, even for a sum as large as $20,000. For a start, there is the influence that credit scores have on a loan application is not as great as many believe. There are more significant aspects lenders are concerned with.

The other is that once a given set of criteria has been satisfied, there is little to prevent the lender from granting the unsecured loan. With everything in the application in proper order, the green light is fine. Here are 3 of the most important aspects that can decide the matter.

1. The Loan Size

It is surprising how many people try to bleed as much out of a lender as possible without realizing the damage they do to their chances. Lenders are careful about their calculations and securing a large unsecured loan with bad credit is heavily dependent on proving affordability.

This means that if a loan of $15,000 is required, then there is no point in trying to get an extra $5,000 for fun. In fact, the sum applied for should be the absolute lowest necessary. Securing approval with bad credit is definitely not impossible, but convincing the lender no repayment issues will arise in the future is central.

It is also wise to consider the debt-to-income ratio, which limits the amount of income to use for debt repayments to just 40% It means whatever the monthly repayments on the unsecured loan are, they should not push the total committed sum above 40%.

2. The Interest Bracket

This element is closely tied with the credit score the applicant has. The lower the score, the higher the interest bracket they are in. And when it comes to applying for a large unsecured loan with bad credit, that higher bracket can make the loan unaffordable.

If the interest rate is high, the problem can be addressed by improving on your credit score. This can be done by taking out some small payday loans, which are guaranteed approval with bad credit, and clearing one or two of the smaller existing debts. With each paid off, the score improves.

Of course, it is essential that the payday loan is affordable and is repaid on time, so keep that in mind when strategizing. Even a small loan of just $500 can be useful, helping to improve the chances of approval when applying for a larger unsecured loan.

3. The Repayment Term

The third area that is looked at is the lifespan of the loan, or the repayment term. This is hugely important for two reasons: firstly, it can ensure the monthly repayments are kept low; and secondly, it affects the overall cost of loan agreement. When applying for a large unsecured loan with bad credit, it is the former issue that is most influential.

The cost of monthly repayments is low because the number of months is higher on a longer term loan. For example, a 3-year loan will comprise 36 monthly repayments, while a 5-year loan will have 60. If the principal sum is $20,000, it means $555 and $333 respectively are repaid off the principal each month.

Obviously, getting approval with bad credit is more likely when the repayment is $333. However, the interest paid over the loan term is going to be more. What needs to be ascertained is if that increase makes the longer term unsecured loan worth taking on.

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