There is no doubt that any lender who is willing to grant a loan to a bad credit borrower is taking a risk – especially when no collateral is provided as part of the loan deal. Granting unsecured personal loans with bad credit does seem like a foolish thing to do – but there is method in their madness.
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As far as a borrower is concerned, the fact it is possible to get loan approval with no collateral is extremely good news. But do not forget that nothing is free, so there are compromises to accept if the loan sum desired is to be attained.
But what are the factors that can help to secure fast and simple approval of an unsecured personal loan? Well, there are some that everyone should be aware of before beginning on the application process.
The Significance of Security
Even the word security intimates the value that it has. Lenders want to be protected against suffering major losses, but lending is a gamble at the best of times. At least with security (or collateral), there is a way to avoid suffering losses when borrowers default. Approving unsecured personal loans with bad credit provides no such protection.
Security does not have to be from collateral, however. In fact, a cosigner is often looked upon as more valuable since he guarantees that monthly repayments will be made. This saves the lender the trouble of converting item into cash, something that can take some time.
The fact that it is possible to get approval with no collateral means that security is not necessary, but for better terms it is vital. With less risk, interest rates are lower and as long as the loan sum matches the value of the collateral, approval is guaranteed - $100,000 collateral secures a $100,000 loan. Unfortunately, if collateral cannot be found, then unsecured personal loans are the only option.
Getting a Loan With No Collateral
The main issue when applying for unsecured personal loans with bad credit are the poor terms that the loan usually comes with. Interest rates can be 2% or 3% above the normal bank rate, and with higher interest rates the affordability of the loan is reduced.
As an applicant, this is not a good development. But there are ways around this problem, which makes such a deal more viable. Depending on the lender that is approached, getting loan approval with no collateral can come down to a few simple measures.
The most practical is choosing to extend the loan term, thus ensuring that the monthly repayments on the unsecured personal loan are lower, and therefore more affordable. The down side to this is that the amount of interest paid over the lifetime of the loan is greater.
Choosing the Right Loan
As already mentioned, online lenders are generally the best option when it comes to seeking unsecured personal loans with bad credit. They are specialists in bad credit lending so offer terms that are better suited to bad credit borrowers.
Finding the best terms, therefore, really only comes down to spending time searching the Internet. The use of comparison sites makes that job easier, with the premium offers available listed within seconds. However, getting loan approval with no collateral still depends on meeting set criteria, and proving an ability to make the repayments.
The type of unsecured personal loans can vary from $1,500 offered by some lenders, with no credit checks carried out, up to $25,000 loans that can require credit checks (depending on the lender). However, in all cases, be sure to check out the lender reputation on the BBB website.