Unsecured Personal Loan With Bad Credit: How to Improve Approval Chances

Written By Paul Johnson on Sunday, June 15, 2014 | 8:02 PM


The idea of getting an unsecured personal loan with bad credit seems a pipe-dream to many applicants. But there are ways to greatly improve the chances of getting approval. In these modern times, there is no reason to believe that a green light will not be given.

Still, there is no point in denying that the task of getting loan approval without security is never a simple matter. So effort has to go into convincing the lender that their investment will be worthwhile. A key part of any application process then is putting together a strong submission that addresses the key concerns that lenders have.

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There is a certain amount of psychology involved, since lenders need to lend if they are to turn a profit. So, they are looking to approve a loan application if they can. So, once the right boxes are ticked, there is little reason to believe even an unsecured personal loan will be rejected.

How to Form a Strong Application

There are basic criteria that all loan applicants have to satisfy, but these are not enough to ensure approval on an unsecured personal loan with bad credit. An applicant proving he is over 18, is a US citizen and has a reliable source of income is fine, but lenders need more than that.

What is needed is a low debt-to-income ratio, which highlights how much excess income is available to meet the repayment obligations. Remember that getting loan approval without security is dependent on income only, with no collateral from which a lender can gain compensation should the borrower default on the loan.

Remember too that with all unsecured personal loans the interest rate to be charged is certain to be higher than normal. This increases the costs of the loan, and therefore affects the affordability of the loan. It means that a small loan is more likely to be approved than a large one.

Choosing Online Lenders

Another step towards more likely loan approval is to avoid the traditional lenders. Banks are reluctant to take on the high risk associated with unsecured personal loans, with bad credit only serving to worsen the deal from their point of view. A far better option is to be found online.

Online lenders have become a favorite amongst bad credit borrowers, chiefly because they offer competitive interest rates and more flexible repayment schedules, offering a more affordable loan deal. They also provide approval without security, though the loan is usually limited to no more than $10,000.

Also, their no credit check approvals mean approval can granted very quickly, if the application satisfies their criteria. Getting unsecured personal loans through a reputable online lender can be the most affordable option.

Traditional Lenders

Still, it may be worth approaching a bank to see what terms they are willing to offer on an unsecured personal loan with bad credit. This may be especially worthwhile if any of your existing loans were granted by them. The reason? They already know your reputation and whether they can trust repayments to be received.

While it is true that almost all traditional lenders are cautious around low credit scores, that does not mean that getting approval without security is completely out of the question. There may be conditions, such as a lower loan sum, but if approval is very possible then it may be worth the move. Besides, there are some risks in accepting unsecured personal loans from online lenders, which is why the BBB website needs to be consulted.


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Author : Paul Johnson ~dollar loan center

Blog, Updated at: 8:02 PM

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