The idea that bad credit borrowers are destined to see their loan applications rejected is not quite accurate. Lenders are now more open to granting loans to those once considered too risky, and a growing number of online lenders even provide unsecured loans with no credit checks.
The development of loan approval processes with no attention to credit history is a major boost to bad credit borrowers, for obvious reasons. But because it means lenders are at a greater risk, there is a price to the convenience on offer. Getting loan approval despite bad credit is accomplished with higher interest rates to pay.
Of course, no loan is approved without the applicant meeting the required criteria, and an unsecured personal loan is known to be the most difficult to satisfy. But there are ways to make the chances of approval much better.
Understanding No Credit Checks
Lenders are no fools, so if they offer unsecured loans with no credit checks, it is certain they have already carefully calculated the likelihood of borrowers defaulting and the rates needed to make a profit. This means that granting a loan without the credit background of the applicant being checked is not the risk it seems.
The strongest defense is that, according to national statistics, bad credit borrowers are more interested in resurrecting a strong credit status than in taking advantage of an easy access loan. Also, many such borrowers had excellent credit histories until circumstances created by the economic downturn impacted on them.
With these facts to consider, granting approval despite bad credit is no gamble, and lenders are not taking such a major leap of faith. And since credit scores were never the most influential element of the approval process, dropping it to permit faster unsecured personal loan approval is justifiable.
Low Loans Limits
Of course, when we say that lenders are no fools, it includes the fact that it is impossible to get very large unsecured loans with no credit checks. The loan limit on the offer is set quite low, usually no more than $1,500. And with the interest rate set very high, the protection from losses is very strong.
The fact is that these loans are designed to grant cash fast to the borrowers facing a financial emergency. Offering approval despite bad credit means approval can be granted as quickly as a few seconds, and the cash deposited into the bank account of the borrower as soon as a couple of hours after the application was submitted.
The advantage to borrowers is that with a smaller loan, the extra debt is contained. But with repayment terms as short as 14 days, there is a lot of pressure to clear the debt so quickly. And with interest rates as high as 25%, repaying these unsecured personal loans is an expensive undertaking.
Cash Advance Loans
There are a variety of loans on offer from lenders that do not require a credit check, but the most common unsecured loans with no credit checks are called cash advance loans (also payday loans). They are named so because they are granted on the back of an upcoming paycheck.
That is what makes approval despite bad credit so easy, but with high interest to calculate for, some problems can be created with regards meeting regular monthly obligations. Repayment of a $1,500 loan, for example, could cost $1,950.
Obviously, it is important to calculate a budget before taking on the debt. But when a financial emergency exists, this kind of unsecured personal loan offers the fastest access to vital funds, making it a lifesaver.