When a loan applicant has bad credit hanging over them, getting approval on large loans is not easy. When the loan is unsecured, then it may be even more difficult. So, what chances are there of getting ,000 unsecured loans for bad credit borrowers who have a bad credit history?
Actually, the chances are not that bad. All that is needed is to know that lenders look out for and provide them with the answers they need. In the end, getting loan approval only ever rests on which boxes are ticked and whether the lender feels confident that repayments will be received on time. So, by satisfying these two issues, a thumbs up to the application is very likely.
Still, this is not to say that anything is guaranteed. Large unsecured loans are, by definition, risky for lenders to grant, and when the borrower has less than a sterling reputation, the risk is higher.
Why Credit Scores Do Not Matter
Approval is never granted on the basis of a credit score. There are much more important aspects to an application that lenders look at, and these have a greater influence over the decision making process. What this means is that getting ,000 unsecured loans for bad credit is always possible.
Of course, the score does have an indirect influence in the approval process. Getting loan approval is almost certain for applicants with excellent scores, between 700 and 800. Lower scores will mean higher interest charges, with very poor scores of between 300 and about 600 ensuring the loan is made quite expensive. Middle scores between 600 and 700 will have slightly lower rates, though higher than the excellent scores.
What this means is that large unsecured loans can be very expensive, which ends up making them unaffordable and, therefore, prompting lenders to reject the application.
Consider the Term of the Loan
There are ways around this problem, however. Agreeing a loan term that is short often seems like a good idea, since the amount of interest paid is as low as possible. The problem is that the principal is quite high, and so the size of the monthly repayment is high. With a ,000 unsecured loan for bad credit, the repayment over 3 years is around 0, including interest.
Trying to save on interest makes some sense, but the overriding issue is affordability. This is because a key part of getting loan approval is affordability since it ensures that the applicant can consistently make repayments. With a large loan, this is particularly important where the size of the principal share in each month is so significant.
So, while a 3-year loan costs 0 in repayments per month, a 10-year loan may cost only 0 per month. It is not hard to see which sum is more manageable. So, extending the loan term on a large unsecured loan is a surer route towards approval.
Selecting the Lender
Of course, applying to the right lender is important too. Seeking a ,000 unsecured loan for bad credit applicants from a general bank is often a mistake, since banks are notorious for charging higher rates of interest. However, online lenders are famed for the lower interest rates and greater flexibility. In fact, for bad credit borrowers, the best chance of getting loan approval is with online lenders.
Searching online is also made a lot easier through the use of comparison sites, but it is important to read the small print to check for hidden charges. And, especially when taking on large unsecured loans, it is important to check out the reputation of the lender of the BBB website.