Everyone is aware that it is easier to get a secured loan than to get an unsecured loan. The reason is very simple: lenders value security. For a lender, the loan is an investment, and as is the case for investments in general, individuals try to avoid risks. However, security is not the only factor influencing the approval of a loan. Your approval also depends on your credit rating, your income, your assets, and your debts, among others, and not just these factors considered individually. When considering a loan application, the applicant is assessed on all these different factors, hence the importance of knowing that if there is a missing element, your chances for a possible qualification are not necessarily hampered.
The main deterrent for those looking for a loan is the credit rating. Some people think that it is not even worth applying for a loan if the credit rating is low. This premise is false, especially for those who would like an unsecured loan.
First, many unsecured lenders do not even consider credit rating. Unsecured loans are typically small and have a short duration, therefore lenders focus more on income and the ability of the applicant to repay the loan.
Secondly, unsecured loans are usually provided by private lenders, and their qualification requirements are not as strict as those of conventional credit institutions. Banks, for example, have to comply with much stricter rules, which makes a lot of sense because they have to deal with much larger loans. On the other hand, an unsecured loan lender will be a lot lenient and will probably have a closer relationship with you than a bank. A “closer” relationship is easier to maneuver, which makes it easier for a bad credit score to pass.
Improve your credit with an unsecured loan from a bad credit?
Many people get an unsecured loan as a way to replenish their credit rating. For example, suppose you have difficulty paying back a few high-rate debt accounts and that undermines your credit rating. So, you consolidate your accounts with an unsecured loan with a lower interest rate, and you use this new loan to rebuild your credit rating.
You may not know that you can use an unsecured loan from a bad credit to improve your credit … In short, having a bad credit is not a good enough reason to be disqualified for a loan. This is just one of many factors taken into consideration during the approval process. A bad credit score does not prevent you from applying for a new loan. Obtaining a new loan will help put your finances back on the right track.