Low credit scores are supposed to mean large loans are out of the question. In fact, the rule has little relevance these days, with so many honest borrowers having been affected by the economic turndown. The truth is one can get loans, even $15,000 unsecured loans, with bad credit because the key is the application, not the credit score.
It is generally believed that poor scores are the killer of loan applications, but they actually have very little influence over the approval process. Getting approval with bad credit is more likely now because of the sheer number of consumers with low scores through no fault of their own. Reliable borrowers have lost their jobs, seen their incomes fall and have gotten into tight financial situations.
Of course, unsecured loans have never come with guaranteed approval, and there are more significant factors at play when lenders consider whether or not to approve an application.
The Significant Factors
An applicant can submit a more effective application when they know specifically what lenders are looking for. Calming their concerns over repayments and defaults is the number one issue, and once a lender is convinced there will be no problem, the approval of the unsecured loan with bad credit is much more likely.
But what is needed to convince the lender? The most significant factors are a reliable income and a healthy debt-to-income ratio. A reliable income is a basic condition, with no lender willing to even consider approval with bad credit if the source of income cannot be relied upon. Providing proof of income, or detailed tax returns if self-employed, are essential.
However, it is the debt-to-income ratio that is arguably the most significant factor. The ratio is set at 40:60, meaning a maximum of 40% of income can be used to repay loans. If the new unsecured loan repayments push that percentage above 40%, the application will be rejected.
Providing Collateral or Finding a Cosigner?
Of course, providing either collateral or a cosigner makes a huge difference when applying for an unsecured loan with bad credit, especially when the sum is large, like $15,000. However, an item for collateral needs to be the same value as the loan, so that the lender has something to compensate them should the borrower default on the loan.
The larger the loan the more difficult it can be to locate an item valuable enough. The idea of getting an approval with bad credit through collateral is fine, but the solution can be hard to come by unless the sum borrowed is restricted.
However, a cosigner is a much more effective solution, offering a guarantee that the repayments will be made without a hitch. As long as the family member or friend is proven to have a good credit history and a large enough income, approval on the unsecured loan is practically approved.
Finding the Right Lender
There are plenty of options when it comes to finding the right lender. However, there is a better chance of securing a large unsecured loan with bad credit from an online lender than a traditional one, like a bank. Also, the best terms are generally found online, with lower interest rates compared to banks, and more flexible repayment schedules.
Subprime lenders, for example, have a reputation for charging higher interest rates, but they are more willing to grant approvals with bad credit. So, if the funds are desperately needed, they can be accessed.
Even at the extra cost, therefore, an unsecured loan from a subprime lender might be best answer, since whatever financial emergency is occurring can be dealt with.