It may seem unlikely, but even borrowers with bad credit can use loans to improve their financial situation. It’s simply a matter of finding a loan offer that is affordable and practical. It is true that when looking for unsecured personal loans with bad credit, the task is more difficult, but not impossible.
It is often forgotten that lenders cannot make a profit by rejecting loan applications. Therefore, the idea of obtaining an unsecured loan should not be foreign to any of us. True, however, securing good terms can be a challenge, and good terms are important if the goal of the loan is to improve your financial situation.
But how can you secure approval, and what are the chances of getting affordable terms on an unsecured personal loan in a potentially weakened financial situation? Here are some factors to consider.
Why look for unsecured loans?
It’s no secret that a secured loan is easier for any applicant to get approved for and comes with lower interest rates. So why would anyone want to apply for an unsecured personal loan with a bad credit score? After all, that just spells trouble.
Well, there are two reasons. First, the applicant may have nothing to offer as collateral, so he or she has no choice. And second, the borrower may simply not want to put any valuable possessions they have at risk. A default on the loan may mean the loss of that item to the lender as compensation.
But it is possible to get unsecured approval on loans that are affordable. The most obvious way is to apply with an online lender. These typically charge lower interest rates and have longer repayment periods, so the monthly repayments for these unsecured personal loans are more manageable.
How unsecured loans can benefit
The money from a personal loan can be spent on anything the borrower wants. It is for personal use and not for a specific purpose, such as a car loan or a loan to build a house. But after obtaining unsecured personal loans with poor credit, the extra funds are best used to pay off debt and improve credit score.
Lenders often grant unsecured approval on the basis that the loan funds will be used for constructive purposes, and stating that the funds will be used to address the credit situation is about as constructive as it gets.
Even a $25,000 unsecured personal loan can be approved if a detailed plan is submitted showing what debt will be paid off and the benefit to the overall financial situation. And with each debt paid off, the credit score is adjusted upward, providing better terms in the future.
Making your unsecured loan affordable
Affordability is the key word for any lender evaluating a loan application, not credit score. That’s why it’s even possible to get an unsecured personal loan with a bad credit score. But there are two things you need to do to make sure your application is considered affordable.
First, if you’re seeking unsecured approval, apply for a modest loan. If $10,000 is considered ideal, you should only apply for $5,000 to get approved and make a big impact on your debt. Then look for another $5,000 down the road.
Second, look for a longer loan term. Most $25,000 loans are repaid over 5 to 7 years. But paying off an unsecured personal loan in 10 years means minimizing monthly payments. Once the fees are low enough, it’s hard not to get approved.
Joycelyn Crawford is an expert in easy loans for bad credit and easy home loans. Visit her website at EasyLoanForYou.com.