Steve L. Hatch
Even though a bad-credit, unsecured-loan is reliably expensive, getting approved for one recently became much easier, and if you follow the right steps, then not only is approval almost guaranteed, but you'll also get the best possible deal.
All lenders prefer to lend to people with lots of collateral and sky-high credit scores, but the present crisis means that the number of people in that bracket has fallen dramatically causing banks to consider loan applications that they would have immediately reverted just a few months .
I said that success 'is almost guaranteed' if you follow the right steps, so let's go take a look at the steps.
In essence, a signature loan, or an unsecured loan, whatever you want to call it, is basically a 'character loan' meaning that the borrower basically signs on a piece of paper and promises to pay back the loan.
If your credit score is poor or worse, but you have a checking or savings account that's in good standing at a local bank, and especially if you know many of the staff on a first name basis, then that's the first place where you should apply for an unsecured loan.
The reason for trying you own land-based bank first, is that if they do agree to give you a loan, then the interest will most likely be significantly lower than what you'll pay elsewhere.
If your local bank turns you down, then your next step should probably unquestionably be to check out a number of online lenders, and I mean "a number".
The competition among online banks is very much fiercer, which means that the lenders are less fussy about who they lend money to, and also that their rates can very often be negotiated downwards.
After you've received several approvals, you should list them with the bank offering the best terms at the top. After that, contact each of the other banks in turn and tell them what the first bank has offered and see if they'll make you a better offer. Always put the bank with the best terms at the top, and repeat the procedure until nobody is willing to better what the bank at the top of the list is offering.
You need to understand and internalize, right now, that interest rates for unsecured personal loans will more than likely be even higher than those for credit cards, simply because there is no collateral involved, and what's more, the worse your credit rating is then the higher the interest rate will be, and the repayment term will most likely be too bitter.
Almost every lender will check a potential borrower's existing debt-to-income ratio, and people who have a debt-to-income ratio of less than 35% will be looked at more favorably, and others less so.
In order to finish on an upbeat note, I want to add that there are two pieces of good news along with all this unpleasantness.
Until recently recently, only people with a very good credit history, a steady income and a FICO score of at least 760 could expect to qualify for an unsecured loan, but the present crisis has caused many lenders to reevaluate, and even though a person with bad credit will not be offered such good terms as a person in good standing, they will now almost certainly be offered a loan by a number of lenders.
What's more, if you make regular payments on an unsecured loan and pay it off on time, then your credit rating will markedly improve.