For bad credit borrowers everywhere, the range of loan sources is far slimmer than they would like. Traditional lenders are more likely to reject their applications on the basis of perceived risk, while the loan size that is attainable is typically small. But there is an answer to the problem: unsecured personal loans from private lenders.
The main issue with unsecured lending is that the lender is not protected in the event that the borrower defaults on the repayments. Security provides a form of compensation, ensuring they are not left out of pocket. To cover themselves, lenders will charge very high interest rates but approval for private loans comes more affordable.
But what are the options open to bad credit borrower seeking an unsecured personal loan, but who not confident of getting competitive terms from the usual loan source? The good news is that there are several, and below we look at 3 of the most popular.
Loans From The Family
The first place people go to when they will be rejected by traditional lenders is to their own family, and when considering unsecured personal loans from private lenders, this choice offers arguably the best terms.
For a start, in terms of approval for private loans, this one is practically guaranteed. The only real impediment being whether or not the relative has the funds requested. If $10,000 is required, then the family member needs to have $10,000 to hand.
Also, in most cases no interest is charged, though this depends on the agreement between the parties. As with all financial agreements, it is important to agree terms of the unsecured personal loan, write them down and sign them. This ensures no confusion in the future.
Online Lending Firms
A second option is to go to an online lending firm. These are certified lending companies, but are independent of any large financial institution. They are usually recognized experts in lending to bad credit borrowers. This makes them a good source when seeking an unsecured personal loan from private lenders.
The positive to this option is that securing approval for private loans is rather straightforward, though there are conditions and criteria to meet. This often means providing collateral, but those offering unsecured financing, it is necessary to prove they have a reliable source of income.
Other factors to consider are the loan interest rate, which can be competitive, and the term of the repayment. This is usually long, ensuring the size of the monthly repayment sum for the unsecured personal loan is kept low.
Online Bidding Loans
The newest source of loans comes from independent lending websites where individuals can bid to lend money to borrowers. This sounds strange but as unsecured personal loans from private lenders go, it is a viable option.
The system works like this. A borrower advertises his or her need of funds, and seeks certain ideal terms. Members of the loan bidding website then offer their own terms, effectively bidding for the right to lend the money. The closest matching terms are accepted by the borrower.
In this regard, securing approval for private loans rests with the borrower, not the lender. However, the lender is entitled to know private financial details like income earned, credit ratings and securing automatic unsecured personal loan repayments directly from your bank account.