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For those of us intent on improving our financial situation, the need to borrow funds is quite acute. Thankfully, the task of getting unsecured personal loans with bad credit is not as difficult as is traditionally thought. In fact, there is no great problem to it if some simple factors are taken into account, and addressed before applying.
As cautious as lenders generally are, there is a need for them to lend to make a profit. For this reason, there are ways around the perceived problem of low credit scores. There are even ways to increase the chances of getting loans approved at low interest rates. These include finding a cosigner to guarantee loan repayments will be made, and making the effort to improve the credit score until unsecured personal loans are more affordable.
Why Bad Credit History Does Not Matter
The idea that credit scores are the most crucial aspect of any application is not quite true. In fact, if they were then the chances of getting approval on unsecured personal loans with bad credit would be practically nil. But since there are tens of thousand of loans approved to people with low credit scores every year, the idea just does not hold water.
It is tempting to suggest that credit histories do not matter when applying for these loans. Statistics show that many of us have bad credit scores and yet we get loans, so that seems to be true. However, credit histories, and the scores that they create, do have an influence over the interest rate that is charged. Sadly, loans approved at low interest rates are highly unlikely when a score is low.
By extension then, a credit score has a say over whether the monthly repayments are affordable or not, and this can then decide whether a lender approves the unsecured personal loan or not.
Getting Around the Problem
With the credit score low, lenders do not usually rule out applicants immediately - though traditional lenders, like banks, do have some very strict lending policies. When looking for unsecured personal loans with bad credit there are some ways to greatly improve the chances of getting good terms. These include getting a cosigner and improving the credit score it self.
Improving a credit score takes a little bit of time, especially if the score is to improve enough to have loans approved at low interest rates. The only effective way is to repay debts, but this can be accomplished either by consolidating all of the existing debt in one large loan, or by taking out a series of small payday loans that can be repaid quickly too.
The benefit of either of these steps is that old debts are cleared, and with each one cleared the credit score is adjusted upwards. When 4 or 5 debts are repaid in full, the difference can mean even repayments on a large unsecured personal loan become much more affordable.
The Advantage of Having a Cosigner
The favored option amongst lenders, however, is the inclusion of a cosigner. This is because a cosigner promises to make the monthly loan repayments if the borrower is unable to. So, getting unsecured personal loans with bad credit is simplified by the fact someone else has promised the loan will not be defaulted upon.
Of course, there is a catch in that a cosigner must have an income that is large enough to meet the repayments in their own right, and must have an excellent credit history. But once these factors are confirmed, then it is certain to get the loan approved at low interest rates, reflecting the greatly reduce risk associated with the loan. And with a large unsecured personal loan approved, the task of effectively managing personal debt can be completed.