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No Collateral Loans For People With Bad Credit?
Many wonder whether it is possible for someone with bad credit to obtain financing without collateral. Truth is that for those with bad credit, secured loans are the best choice since the risk that bad credit implies is compensated by the guarantee secured loans include. Thus the chances of approval are increased by applying for secured loans. Yet it is possible to obtain unsecured loans with bad credit if you know where to look.
The key to obtaining unsecured financing with bad credit is to reduce the risk that lending to you implies either by improving your credit or by offering another kind of guarantee of repayment. In any case, it is also essential that you know where to look as traditional finance sources seldom deal with loans for people with bad credit, let alone unsecured loans.
Risk Reduction Explained
Unsecured loans have harsher credit requirements for approval due to the fact that there is no collateral guaranteeing repayment of the loan and thus, the lender is taking a higher risk by lending the money. Thats why it is important to reduce the risk implied in the financial transaction to guarantee both approval and advantageous loan terms.
The most effective way to obtain approval that will also have long time benefits is to pursue a credit improvement program. Avoiding late payments and missed payments for a period of time of no less than six months can do a lot towards improving your credit. However, when time is not available and you need financing there are other ways to obtain approval even with bad credit.
No Collateral Guarantee Of Repayment
As explained above, some form of guarantee of repayment is needed to reduce the risk implied on unsecured lending in order to compensate for the bad credit of the applicant. And given that these loans are unsecured and no collateral is available, a non-collateral guarantee of repayment will be needed in order to boost approval chances.
The best alternative to collateral is thus, applying with the aid of a co-signer that features a good credit history on the credit report. A co-signer is obliged to the repayment of the loan just like the main borrower and in the event of default, he would be forced to continue repayment or the lender is entitled to take legal action against him also.
Non Traditional Lenders
Seldom banks and traditional lenders will be willing to consider approving an unsecured loan for a bad credit applicant. Thus, in order to obtain finance you will have to resort to non traditional lenders you can find by doing a quick search on the net for bad credit unsecured loans. Just remember to consult several lenders so as to compare their loans.
You can always request loan quotes or contact them informally making sure that your credit report is not pulled in order to avoid too many credit verifications that might affect your credit score negatively. Once you have decided which lender you want to work with, fill the online application or contact them telephonically in order to apply for your desired loan.
Bad Credit Loans: Perfect Solution for those who are Imperfect!
We are imperfect beings in a very imperfect world, and the one thing we can count on is that things will go wrong, and that each and every one of us will have problems. Financial problems are one of such common problems. If, in the past, you have made late (or missed) payments on a loan, credit or store card, or have had other problems such as business liquidation, you may have been marked as having bad credit. A myth pervades our society that individuals who developed bad credit will never again obtain a loan. However, the truth is even with the worst credit, even one day after bankruptcy, an individual with bad credit may still obtain a loan. Such loans are termed as bad credit loans.
Bad credit loans are just like any other conventional loan with the only difference that it is available to people with bad credit history. Bad credit loans can be put to any use be it to finance your dream vacation, to buy a luxurious car, to make improvements at home, to start a new business or finance the existing one, to consolidate all your existing debts into a single loan or simply to repair your credit score.
Both secured and unsecured options are available for bad credit loans. Secured bad credit loans are the loans that attach a clause of collateral with it. This loan provides borrowers with an opportunity to make use of the equity stored in their property. The advantage with secured bad credit loan is they tend to cover up the bad credit flaw, as it provides security to the lender in the form of collateral and hence reduce the risk borne by the lender and therefore, borrower can get bad credit loan at lower interest rates. Unsecured bad credit loans do not required putting any security against the loan.
Significant feature of unsecured loans for bad credit is that it gets approved very quickly, as it does not involve the task of valuation of equity value of the borrower’s property.
The principal contention of the borrowers is the excessively high rate of interest that they have to shell out for bad credit loans but in order to nullify the effect of higher rate of interests, terms on which loans are offered to borrowers are fairly lenient than for the bad credit borrowers.