Unsecured Personal Loans With Bad Credit: Why Guaranteed Approval Is a Myth

Written By Paul Johnson on Monday, May 12, 2014 | 2:58 PM


For those of us who have poor credit ratings, the task of finding a lender willing to approve a loan application is a little more taxing than for others. But the range of online loan deals means there are good terms to be found. Even when applying for unsecured personal loans with bad credit, it is possible to find loans that are affordable.

But despite the array of apparent excellent offers, it is important for borrowers to take a detailed look at what is on the table. Online lenders are aggressive advertisers and some of the less trustworthy operators are very willing to make promises they cannot keep. A perfect example is the promise of a guaranteed loan approval.

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This is, of course, just one of a number of advertised features that are only carrots designed to attract consumers. And the most vulnerable to these promises are those in need of unsecured personal loans.

The Problem With Guarantees

So what is the problem with offering guarantees to applicants? Well, lender have the right to offer any guarantees they wish, but they have to stand by that promise too. A guarantee would certainly draw a lot of business, especially amongst those seeking for unsecured personal loans with bad credit.

But think about what a guaranteed loan approval actually means. In effect, it is about giving money away to borrowers, and paying no heed at all to the reasonable risks of loan default. Basically, a guarantee cannot be realistically given by a lender if they are in the business of turning a profit.

However, it may be feasible to offer guarantees for secured loans, where collateral is provided as security against defaults. In such cases, the lender is covered so a loss is avoided. But for unsecured personal loans, the only protection a lender has is the promise from the borrower to make repayments.

The Problem With No Credit Checks

Another commonly advertised promise is that no credit checks will be carried out on the applicant. This is an especially popular feature for those applying for unsecured personal loans with bad credit since the bad habits of the past will not be used against them.

The offer does seem feasible, particularly compared to the promise of a guaranteed loan approval, since certain conditions are included in the criteria. For example, the loans with which this feature is offered are usually small, and offered only to those who provide their bank account details. This means the monthly repayments can be withdrawn automatically on the date due.

But lenders still need to know how likely it is that the borrower will default on the loan. For small sums, like $3,000, this may not be a major worry, but large and long-term unsecured personal loans offer a bigger risk, so credit checks are almost certainly carried out anyway.

Check Lender Reputation

For every borrower, there are two ways to limit the risk of falling foul of false promises: checking lender reputation, and reading the small print. It is easy to understand why those of us seeking unsecured personal loans with bad credit should want to believe in the promises, but the reality is that those that might seem too good to be true, actually are.

The Better Business Bureau allows people to check the reputation of almost every business in operation. It grades them A to F, based on the number of complaints made about them. Only choose a grade A lender, then check out the small print of their deals.

Often hidden charges and conditions are revealed there, and it is here that the true worth of an unsecured personal loan is proven.


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Author : Paul Johnson ~dollar loan center

Blog, Updated at: 2:58 PM

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