Unsecured Loans Can Be Large Enough to Rebuild Credit Rating

Jul 16
08:08

2012

Sarah Dinkins

Sarah Dinkins

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The idea that unsecured loans cannot be much is not exactly accurate. It is possible to get a substantial loan without collateral, and start the process of rebuilding credit rating.

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Recovering from the hit that so many of us have been struck by financially is not quite the impossibility that it seems. There is a school of thought that with a bad credit rating,Unsecured Loans Can Be Large Enough to Rebuild Credit Rating Articles the chances of getting unsecured loans approved are next to zero. Even if we were lucky enough to find a lender willing to take the risk, the sum of the loan would be small.But neither of these ideas are actually true, and it is possible to get large personal loans without security and without too much trouble. The issue is not actually the size of the loan, though it is a factor that is considered by lenders, the priority is the ability to make repayments on time. So long as there is a provable income and method of repayment, personal loans that are unsecured can be given the thumbs up.What is true is that traditional lenders are not the most accommodating, depending on just how low the credit score of the applicant is. But there are other lenders and other ways to secure a large loan.Convincing the LendersThe issue with every loan is convincing the lenders that they will get their money back. With secured loans this is rather simple since an item is signed over in compensation, but for unsecured loans it is a little more tricky. The fact that an applicant might have a bad credit rating means that the task is more difficult again, but by backing up an application lenders can be convinced they can trust the borrower.There are a number of signs that lenders look for. First of all, that the credit history was not always poor and that circumstance, not bad habits, caused credit scores to fall. This shows the applicant can be trusted to repay a personal loan without security .Another is that the applicant is fully aware of their situation, which tells the lender that the applicant knows the commitment required. A third is that the purpose is genuine. Applicants for personal loans that are unsecured should show evidence that the money will be spent properly.Search on the InternetBanks and traditional lending institutions tend to have very strict policies regarding unsecured loans, particularly to those with low credit ratings. So, it is always a good idea to check the online options before settling on any offers that may exist. Online lenders are known to offer the best possible rates and terms for personal loans without security.The reason this option is so accommodating is that online lenders generally only offer personal loans that are unsecured, since they succeed by filling the void left by policies of the traditional lenders.Of course, when doing any kind of business over the internet, it is essential that caution is applied. With unsecured loans especially, the fact the applicant must provide bank details leave them vulnerable. Consult the Better Business Bureau to find out about a lenderPlan in the Long TermIf your credit score is very low, then building it gradually through a number of small personal loans without security is one way of getting closer to a large loan. For example, taking out a $3,000 loan and repaying it in full over 12 months, can see credit scores shoot up. The money can be use repay a segment of the overall debt.However, personal loans that are unsecured are the biggest risk for lenders, which is why rates can be expected to be higher. Online unsecured loans are generally lower, but for larger loans be prepared to agree to imperfect terms.