It is not easy to find a lender willing to trust bad credit borrowers with a large unsecured personal loan. But while once upon a time, poor credit histories suggested the applicant could not be trusted, today such stigma is gone. All that an applicant needs to do is prove they can make the repayments.
Affordability is the chief concern for lenders, not the reputation of borrowers. This is because, in recent years, so many honest borrowers have seen their credit ratings slump through no fault of their own. There are even lenders willing to give large loan approval with no security.
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What has not changed is the fact that there is strict criteria to meet. So, while there is every chance of getting approval on personal loans, it requires a well-presented application to convince lenders to do so. Such an application can be put together with three simple steps.
Know Your Credit Score
Knowing the strength of your own credit score is useful since applicants get to see what it is lenders want to know. When applying for a large unsecured personal loan, the score dictates the interest rate to be charged, so the score has an influence over the affordability of the loan.
A credit score of 450 is extremely low, ensuring an applicant has no chance of getting approval with no security. An excellent score of 700 is far less troublesome. If the score is very low, then to strengthen an application it is necessary to improve the score, which requires effort and pre-planning.
It is possible to improve the credit score with a series of small payday loans over perhaps 5 or 6 months. As each is repaid, the score is raised. If the debt is large, then a single consolidation loan could be used to repay all or part of it. However, it is also a good idea to have the score reviewed before applying for a personal loan.
Apply for a Realistic Sum
Improving your credit score is perfectly fine, but it is equally important to be realistic regarding the application. A large unsecured personal loan is not necessarily a $100,000 loan. In the eyes of a lender, with no security offered, a figure of just $25,000 is a large loan.
Improved credit scores can do nothing for someone seeking a loan that is just too large. Interest rates will be sky high and monthly repayments unaffordable, so getting approval with no security really does become an impossibility.
Working out a conservative budget is an important step in avoiding this situation. And it may be necessary to think outside the box. For example, to secure a personal loan of $25,000, apply for one loan of $15,000 and then, after a period of time when regular repayments have improved the credit score a little, apply for another loan of $10,000.
Choose Your Lender Carefully
Accepting the first loan deal is universally considered a bad idea. It is essential that options are considered before choosing the lender and the deal that is offered. With large unsecured personal loans this is especially true because different lenders will have different policies regarding the risk.
Getting large loan approval with no security can be a challenge, but even if the interest rate charged by a lender is competitive, there may be hidden fees and extremely strict late payment and missed payment penalties that will push loan costs upward. The small print of every deal needs to be checked.
Online lenders tend to provide the best overall deal with personal loans, but it is also necessary to check their reputation with the BBB website or Verify1st site to ensure they can be trusted.
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