Traditional lenders will testify that the chances of getting an unsecured loan with bad credit are practically impossible, but the truth is not so clear. There are factors more significant than bad credit scores, so there is hope even for applicants in very difficult financial situations.
Actually, anyone can secure approval on a loan so long as the critical boxes are ticked, and the repayments are proven to be comfortably affordable. In fact, look after those key elements, and an application will be strengthened enough to practically ensure approval with bad credit.
Of course, a lender can decide on the margin of error that may exist, so what might seem like a done deal from the point of view of the applicant may not quite satisfy the lenders. By all accounts, the chances of seeing a large unsecured loan granted are far greater. But what are the factors to look after?
The Truly Important Factors
Applying for any loan with no idea of what the lender is interested in can be detrimental to the chances of a success. It is not enough to fill out the application form well; the information is what is most important. Basically, convincing the lender that repayments are assured is the key to getting unsecured loans with bad credit.
So, how can this be done? Well, logically, the income of the applicant is important, but there is also the issue of the debt-to-income ratio. In truth, this is the most important piece of information. Income only confirms a source from which to make repayments, but to make sure of getting approval with bad credit, affordability needs to be established.
The debt-to-income ratio is significant because it confirms how much income is available to cover repayments. It does not matter if income is $10,000, what matters is that enough excess exists to meet repayments on a large unsecured loan. The ratio is 40:60, so if $1,000 is in excess, repayments can be no more than $400.
The Security of a Cosigner
It comes as no surprise that offering security is a good way to ensure approval. But to get an unsecured loan with bad credit, collateral cannot be used, as it would change the status of the loan. But even if it was used, and the status changed, the collateral must equal the value of the loan sum.
When it comes to large loans, finding something valuable enough is not easy. However, securing approval with bad credit is made even easier when a cosigner is found. Cosigners are not considered security, but they do offer assurance that repayments will be made, even when the borrower is not able to make them.
Still, the cosigner cannot be just anyone. He or she must have an excellent credit record and have an income large enough to make repayments, if they need to step in. With a large unsecured loan, the repayments may still be too high.
Locating the Best Deal
Despite the array of options, the job of finding the best possible deal is made simple thanks to the Internet. Securing approval for a large unsecured loan with bad credit can often come down to finding the right online lender.
Online lenders tend to offer the best terms and conditions, especially for bad credit borrowers, and are generally more willing to grant approval with bad credit. This also means that approval is faster than with traditional lenders.
The interest rate charged is usually lower than that charged by banks, so even a large unsecured loan can be considered a very affordable option.