Getting an unsecured personal loan for bad credit is not as impossible as many expect. But there are advantages and disadvantages to the deal that bad credit borrowers should note before taking the debt on.
Loan approval is never guaranteed and rarely to be relied upon. Offering no security with the deal can make the chances of approval even less likely, but even when it comes to applying for unsecured personal loans for bad credit, there is always a chance of success.
In some cases, bad credit borrowers do not even attempt to submit an application for an unsecured loan deal because they are convinced that rejection is the only result. But it is worth noting that securing loan approval with poor credit scores is not an uncommon outcome.
Still, there are definite criteria to meet and several compromises to accept. So, like any other loan, there are advantages and disadvantages to getting an unsecured personal loans. Taking the time to know what they are is always useful for an applicant.
Advantages of Unsecured Loans
The biggest advantage to getting an unsecured personal loan for bad credit is the general ease in getting it approved. It might seem strange to say this, but loans provided specifically for bad credit borrowers are usually structured to allow high approval rates.
In many cases, no credit checks are carried out and this saves a considerable bit of time when seeking approval with poor credit scores. When credit histories are ignored, approval can be provided in just a few minutes (even seconds) and cash can be secured in just 2 hours.
Finally, the unsecured personal loans made available to bad credit borrowers have fixed interest rates. This makes budgeting very simple, greatly enhancing the affordability of the loan in the long run.
Disadvantages of Unsecured Loans
Of course, amongst the main disadvantages of securing an unsecured personal loan for bad credit management is that the interest rate is usually much higher than normal. This is understandable, since the lack of collateral means the lender is at risk of losing their money. The higher interest rate is designed to lessen the potential losses.
Also, the size of the loan is usually quite low, with loan limits restricted in another effort to ensure the smallest possible losses. Often the loans range from just $100 to $1,500, with loans up to $10,000 possible in certain loan deals. Remember, when granting approval with poor credit scores, the lender is accepting all of the risk.
When it comes to payday loans, the repayment period is typically extremely short, sometimes just 14 days. In such cases, a small unsecured personal loan is preferable anyway. Larger loans can have terms of 90 days or perhaps 180 days.
Getting Loan Approval
Of course, getting approval for an unsecured personal loan for bad credit is not very easy. But as with all loans, if the criteria are met and the right boxes ticked, then approval is likely. When it comes to a payday loan, a large enough monthly paycheck is required since it is granted against this single factor.
Getting approval with poor credit scores on larger loans can be helped by detailing what the purpose of the loan is, and providing details of what it will be spent on. Stating that it is for debt consolidation, for example, can be very helpful since the lender knows the purpose is constructive not frivolous.
Still, it all comes down to affordability, and so long as the monthly repayments are available, the green light on an unsecured personal loan is a real possibility.