Getting Unsecured Loans with Bad Credit Depends on Some Important Factors
Getting approval on unsecured loans with bad credit can be challenging, but certainly possible. What is important is that close attention is paid to the array of factors on which approval depends.
The good news is that the growth of the online lending industry has taken some of the sting out of the task. While traditional lenders remain reluctant to trust individuals with a poor credit history, online lenders are known to offer online finance deals that are more affordable to the borrower.
However, it is the compromises that applicants must be made that must be kept in mind. For example, granting unsecured loans is a risky business in the best of times, so lenders will charge higher interest rates in order to reduce the possible losses suffered should the loan being default upon.
Conditions To Consider
The chief problem when seeking unsecured loans with bad credit is that the low rating, and how it was received, suggests certain things to the lender. A low rating may be due to poor financial management, irresponsibility or plain bad luck, but a lender wants to know what type of person the applicant is.
For example, if the rating is low because the applicant historically showed no regard for existing debts, then it would be hard to justify trusting him or her. Even with online finance deals, where the lenders have an open mind, the recognized risk would be extreme.
But an increasing number of unsecured loan applications include low credit ratings due to some form of bad luck, such as losing their job, seeing a downturn in company profits, or just a general reduction in income.
Interest Rates and Other Terms
Depending on which type of borrower the applicant is, the terms set for a particular loan can be good or bad. For example, in getting an unsecured loan with bad credit it can be expected that the interest rate will higher than usual. However, the degree to which the rate is above the normal rate depends on the perceived risk the lender is under.
Generally speaking, online finance deals offer more competitive rates than those offered by banks. But there are also aspects, such as size and lifetime of the loan, that cannot be ignored. Many lenders are not willing to lend large sums on unsecured terms, and instead limit the loan sum to between $1,500 and $5,000.
The length of the loan has a major influence over the eventual overall cost. After all, a two-year unsecured loan has a lower interest sum than the equivalent loan over four years. However, the monthly repayment is less for the four-year loan.
Arguably, the most popular variety of unsecured loan with bad credit is the cash advance loan. Also known as payday loans, the terms are usually quite harsh, with high interest rates (some have been noted at 30%), and low loan limits.
Most lenders that offer payday loans limit their sum ranged to between $100 and $1,500, though these can be approved and accessed very quickly. They are highly popular online finance deals because of the fast approval rate, but there is pressure to repay the loan within 30 days.
As the name suggests, the loan is only granted as an advance on an imminent paycheck, which only places pressure on regular monthly financial obligations. However, when emergency funds are needed, they are one of the more accessible forms of unsecured loans around.
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ABOUT THE AUTHOR
Mark Venite is the author of this article and a successful financial advisor with 20 years of experience. He helps people to get approved for Bad Credit Personal Loans for 5000 and Bad Credit Student Loans Guaranteed. For more information about his services please visit him at http://www.accessmyloan.com