For those of us in need of a cash injection, the more plausible option is to apply for a loan. But when our credit history is not so good, our credit scores are low, and we have no collateral available, it can seem like a lost cause. However, it is still possible to get unsecured personal loans with bad credit.
There are obvious conditions to any loan, and when applying for one with bad credit, it is only natural that the terms and conditions will not be ideal. But if the compromise is fair, then the extra cost can be worthwhile.
Getting approval without collateral is no great trick, but when the loan sum is large – as much as $25,000, for example – there is some effort required in compiling an application that is convincing enough to get the green light.
So what can be done make the chances of getting a $25,000 unsecured personal loan strong? Well, there are a few simple steps to take that can help.
1. Check Your Credit Status
It is never a good idea to presume our own scores. In fact, most people are surprised at just how low their scores are, and therefore how weak their credit status is. Applying for a large unsecured personal loan with bad credit is tough enough without going into things blind.
Lenders are happy to grant unsecured loans to applicants with excellent credit scores (730+), but it is much harder to convince them to grant approval without collateral when the score is around 600. Therefore, it is a good idea to strengthen your score by clearing some of the existing debt.
Take a series of small personal loans to clear individual debts (credit card, auto loan etc). Each repaid debt increases the score so that eventually your status is closer to the excellent mark, and approval of a large unsecured personal loan becomes closer too.
2. Know What Is Affordable
It is foolish to seek a large loan if the repayments are going to be too expensive, so be sure to calculate what is within realistic reach before applying for any loan. In fact, this is pretty much essential when preparing to apply for an unsecured personal loan with bad credit.
Knowing what is affordable means working out your excess income. Add all of your monthly expenditure and take that form your monthly income. But remember that, to secure approval without collateral, the repayments must adhere to the debt-to-income ratio, which states only 40% of income can be used to repay loans.
3. Know The Loan Purpose
Stating a specific purpose for the unsecured personal loan is a major bonus when applying. This is because lenders want to know that the money (if granted) will be used wisely, not recklessly. Providing a spending plan is the best way to convey the purpose.
The more detailed the spending plan the better. Include everything the money is to be spent on, from clearing debts, to home repairs to college fees. Once the lender knows where it is going, they are usually more comfortable about granting an unsecured personal loan with bad credit.
4. Choose The Lender Carefully
Of course, getting approval without collateral depends greatly on the particular lender. Not all will be willing to do so with loans of $25,000, so choose who to apply to carefully. An online search will usually cast up some good options, but always visit their websites directly before proceeding.
Also, check out their reputations on the Better Business Bureau website before committing to anything. Not all lenders offering $25,000 unsecured personal loans to bad credit borrowers are as great as they seem.