There was a time when the idea of getting approval on unsecured personal loans for bad credit borrowers was almost ridiculous. But in the modern economic climate, a bad credit rating no longer has the negative connotations it once did.
Indeed, lenders are generally far more interested in more practical aspects of an application form, such as the stated income of the applicant and the existing debt they might have. If both of these aspects look healthy, then even approval on large loans - such as £50,000 - is very much possible. The credit score is not really taken into account.
Of course, different lenders have different criteria, and can have differing attitudes to the same facts. The problem with unsecured personal loans, however, is that there is very little opportunity to recover losses should the borrower default on the loan. But even this factor does not mean that the approval process is slowed down at all.
Reasons for Failure
The most important factor when preparing an application is to understand why applications fail, since only then can applicants hope to avoid the same fate. With unsecured personal loans for bad credit borrowers the clear concentration is on income, with lenders needing to know that repayments can be met.
But having a large income is not necessarily enough to secure approval on large loans. What must be taken into account is the amount of available income on hand to cover the repayments. With loans as large as £50,000, that can me as much as £1,000 each month, depending on the interest rate and the term of the loan.
Even if the applicant has a monthly income of £10,000, this may be too much to handle when the debt-to-income ratio is taken into account. The ratio is set to 40:60, which means that no more than 40% of the available income should be committed to debts. So, if the free income amounts to £1,500, a £1,000 monthly repayment on the unsecured personal loan is too much to handle.
Value of a Cosigner
One way around a possible impasse is to involve a cosigner in the application. Their value when seeking an unsecured personal loan for bad credit borrowers is huge, with the promise to cover monthly repayments in the event the borrower missing a payment, all but removing the element of risk.
To lenders, a cosigner is even better than collateral since the cash payment is assured, and they do not have to worry about converting an item into money. However, they have conditions, if approval on large loans is to be secured, not least that the cosigner must have an excellent credit history, and have sufficient income themselves to cover the repayments.
Article Source: Ezine Articles
Indeed, lenders are generally far more interested in more practical aspects of an application form, such as the stated income of the applicant and the existing debt they might have. If both of these aspects look healthy, then even approval on large loans - such as £50,000 - is very much possible. The credit score is not really taken into account.
Of course, different lenders have different criteria, and can have differing attitudes to the same facts. The problem with unsecured personal loans, however, is that there is very little opportunity to recover losses should the borrower default on the loan. But even this factor does not mean that the approval process is slowed down at all.
Reasons for Failure
The most important factor when preparing an application is to understand why applications fail, since only then can applicants hope to avoid the same fate. With unsecured personal loans for bad credit borrowers the clear concentration is on income, with lenders needing to know that repayments can be met.
But having a large income is not necessarily enough to secure approval on large loans. What must be taken into account is the amount of available income on hand to cover the repayments. With loans as large as £50,000, that can me as much as £1,000 each month, depending on the interest rate and the term of the loan.
Even if the applicant has a monthly income of £10,000, this may be too much to handle when the debt-to-income ratio is taken into account. The ratio is set to 40:60, which means that no more than 40% of the available income should be committed to debts. So, if the free income amounts to £1,500, a £1,000 monthly repayment on the unsecured personal loan is too much to handle.
Value of a Cosigner
One way around a possible impasse is to involve a cosigner in the application. Their value when seeking an unsecured personal loan for bad credit borrowers is huge, with the promise to cover monthly repayments in the event the borrower missing a payment, all but removing the element of risk.
To lenders, a cosigner is even better than collateral since the cash payment is assured, and they do not have to worry about converting an item into money. However, they have conditions, if approval on large loans is to be secured, not least that the cosigner must have an excellent credit history, and have sufficient income themselves to cover the repayments.
Article Source: Ezine Articles
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