Getting Unsecured Personal Loans With Bad Credit Histories: Secrets to Guaranteed Approvals

For so many people, the level of confidence that accompanies applications for unsecured personal loans, with bad credit a part of the equation, is quite low. Surely, no lender would be willing to take on the risk associated with such an agreement.A secured loan brings with it a sense that losses can be recouped by selling off the item of collateral provided, so loan approval from lenders is much more likely. Without that security, the chances are lower. But there are some secrets to securing approval on even an unsecured personal loan, though the size of the loan might be quite limited.Keeping Applications RealisticThe first secret to practically guaranteeing approval on unsecured personal loans, with bad credit such a strong influence, is keeping everything realistic. Low credit scores limit the opportunities that borrowers have, and it is important to keep this factor in mind.The reason is there is no chance of getting loan approval from lenders if the sum being sought is too much for the borrower to be able to repay. Basically, there is no point in seeking a $50,000 loan when only $5,000 is affordable. Between the interest rates and the term of the loan, a $50,000 loan may require repayments of $1,000 per month, while a $5,000 loan may need repayments of $250.Lenders are very interested in the long-term repayment ability of borrowers. This is especially true for unsecured personal loans, where the only way for the lender to get their money back lies in the income and employment of the borrower.Know Your Credit ScoreA key part to applying for what is realistic is knowing what the credit score is. Those seeking to get unsecured personal loans with bad credit will be able to tailor their applications once they know where exactly they stand, and even to strengthen their position.For example, if a person learns that their credit score is 500, they will know that it is impossible to get loan approval from lenders if they apply for large sums. Only small loans, perhaps of no more than $3,000, are likely to be given the thumbs up.This means that a loan of just $1,000 can be applied for with confidence, and when that is repaid the credit score is adjusted to reflect the fact that a debt has been cleared. Over time, the credit score improves, increasing the loan limit, decreasing the interest rate applicable and making it more likely to get approval on the larger unsecured personal loan needed.The Debt-to-Income RatioA key secret to guaranteed approval on a loan application is having the right debt-to-income ratio. More than anything else, it is this ratio that can lead to approval of an unsecured personal loan, with bad credit effectively being overlooked. In fact, an applicant with a bad credit score could be approved, and an applicant with a good credit score rejected based on this ratio.The ratio relates to the degree of income that is free to use for loan repayments, with a ratio of 40:60 considered the limit. So, only if 40% of the available income can cover the necessary repayments will an applicant receive loan approval from lenders.Basically, even with a monthly income of $10,000, an applicant might see their attempt to get an unsecured personal loan fail if their existing debt is too high. To lenders, it is far more important that the borrower can meet repayments, and meet the unexpected expenses that often play havoc with repayment schedules.