Traditional lenders shy away from the risks involved with lending money to people with bad credit. They are willing to lend if the applicant is willing to pay interest rates over and above what is offered elsewhere in the lending market.
Negotiations are still part of the lending industry. The financial crisis did not eliminate this key factor in any way at all. Affordability is the key to obtaining a large unsecured personal loan.
A lender lends money to people that they believe are going to pay them back. That is the basis of lending. If you want to get approved for a large unsecured personal loan you need to provide the assurance to the lender that you will make the repayments on time.
Approval is Possible
If you read the financial press you will see that loan approvals are hard to get. Large loan approvals are at a premium. Yet it is possible to borrow $20,000 in an unsecured loan. Unsecured lending means that the lender only has your word to go on that they will be repaid.
Secured loans have collateral attached. This supplies the compensation needed to repay the loan. Collateral consists of either an asset or a person. When the collateral is a person, that person is called a cosigner.
The collateral or loan security must match the loan amount. This security also helps procure the best interest rates since the risk of repayment is low.
It is important to remember that a lender can have this same assurance of repayment without putting up any security. This is possible by replacing the collateral with proven income.
By showing to the lender that you have a source of income that is steady over a period of at least six months, you are showing that your future income will be sufficient security to repay the loan.
Income alone is not enough. You could be making more money than anyone else in the world but if you have to spend all of it each month to meet your obligations, it does you no good. This is where the debt-to-income ratio comes in. This ratio shows that there is enough money left over after you pay your other bills to also make your loan payments.
Structuring your repayment terms so that you have a low monthly repayment sum makes it more likely you will be approved for unsecured personal loans up to $20,000. By extending the life of the loan you can spread the principal over more months and so lower the monthly repayment amounts.
As an example, if you borrowed $20,000 with a five year payback period, you would be paying $333 each month for 60 months, assuming no interest. If you double the life of the payback to 120 months, you would be only paying $167 each month.
The great thing that accompanies longer repayment periods is that lenders do not need to charge as high of an interest rate. They can make their profit over a longer period of time with a lower rate and end up making more.
Do not assume that what used to work with loan applications will still work today. Think outside the box. Be willing to compromise on the terms of the loan and you will be better off financially.
Your Credit Score
Improve your chances of approval by taking some time to raise your credit score. Take out smaller loans, even if they are payday loans. Use these loans to pay off other debt and then repay the payday loan quickly.
This method will raise your credit score quickly after applying it five or 6 times. But never let the payday loan run longer than 30 days before you repay it. These loans often will charge you 30 percent for the 30 days.