It would be a mistake to think that the only way to secure approval on a large unsecured loan is to accept the worst loan terms available. Lenders face enough competition, and the most fair-minded of them will always offer the best deal they can.
Of course, the real mystery is how a loan of perhaps $20,000 can be secured by a bad credit borrower who has no collateral with which to secure the loan. The lender is accepting the risk involved, and faces large losses if things go wrong. How then can the borrower expect to secure the best interest rates possible?
The answer is that approval on any loan, even large unsecured personal loans, comes down simply to whether or not the borrower can prove their ability to pay and the general affordability of the loan deal. Once that is done, no lender can reason that the risk is too great to accept.
Giving Lenders What They Want
If lenders want assurances that the borrower can pay, and can afford to commit for the term of the loan, then how can this be given? Actually, it is not very difficult, so when it comes to applying for a large unsecured loan, there is every chance of getting approved.
In terms of proving an ability to repay the loan, employment status and income are the issues that matter. This is why many lenders stipulate the applicant must have held a full-time job for at least 6 months prior to making the application. And their income must be large enough to comfortably meet the projected repayments.
Affordability is helped by showing that the repayments can be comfortably made, and not leave the borrower under financial pressure. When the loan comes with the best interest rates possible, the cost is lower. Having a healthy debt-to-income ratio is also very helpful when seeking an unsecured personal loan.
Improving Your Approval Chances
As already mentioned, employment and affordability are hugely important when convincing lenders to grant a large unsecured loan. However, there are some other steps that can forward your funding cause. For example, the size of the monthly repayments and some form of reassurance.
The main advantage with secured loans is that the lender has something from which to get compensation should anything go wrong, so normally these deals come with the best interest rates available. But when it comes to unsecured loans, there is no such assurance available. What can solve that issue is the inclusion of a cosigner in the deal.
A cosigner offers real assurance with an unsecured personal loan, because the nominated individual promises to make the monthly repayments on behalf of the borrower when they find it difficult to pay. However, that individual should be in a strong financial position, with a good credit rating.
Reducing Repayment Sums
The other move to help ensure affordability is keeping the monthly repayment a low as possible. Many applicants believe the lender sets the sum, but in fact they can have a say in the size of their monthly obligation too. Basically, if getting a large unsecured loan, keep the repayment term as long as possible.
The concept is straightforward: the more years the loan is repaid over, the smaller the share of the principal is in each monthly repayment. When the repayment is low, the risk of default is low too. And because the lender earns more in interest over time, they can afford to offer the best interest rate in the circumstance.
All in all, it means that the pressure involved in repaying the unsecured personal loan is far less than it might otherwise be. Lenders are happy as long as they feel assured their investment is safe.