Bad Credit Unsecured LoansBy Caitlin in Loans
Everybody knows it’s easier to get a secured loan than it is to get an unsecured loan. The reason is simple: lenders like security. For a lender, a loan is an investment and like any other investment, people like to avoid risk. Security is not the only factor behind a loan approval. Your approval also depends on your credit score, your income, your assets and debts and a few other factors, but not on any of them individually. When analyzing a loan application, an applicant is evaluated on all of these different factors so it is important to point out that if you are lacking in one area, your chances for qualification are not necessarily hampered.
The biggest deterrent for those looking for a loan is their credit score. Many feel that it’s not even worth applying for a loan when their credit score is low. This premise is false, especially when applying for an unsecured loan.
First of all, many unsecured lenders don’t even look at credit scores. Unsecured loans are usually small and have short terms therefore lenders focus more on income and the applicant’s ability to pay down the loan instead.
Second, unsecured lenders tend to be private lenders, and their rules for qualification are not as strict as a conventional lending institution’s. Banks, for example, must adhere to very tight regulations which makes sense because they deal with much larger loans. On the other hand, an unsecured lender is much more lenient and will likely have a closer relationship with you than a bank would. A “closer” relationship is easier to leverage, and so a weak credit score is easier to squeeze through.
Improve your credit with a bad credit unsecured loan?
A lot of people acquire unsecured loans as a way to rebuild their credit scores. For example, suppose you are having trouble paying back a few high interest debt accounts and it is hurting your credit score. Well, you consolidate those accounts with a lower interest rate unsecured loan and use this new loan to rebuild your credit score.
Bet you didn’t know you could use a bad credit unsecured loan to improve your credit, huh?
All in all, having a bad credit score is not reason enough to be disqualified for a loan. It’s just one of the many factors considered during the approval process. If you have a bad credit score, don’t let it discourage you from applying for a loan. Getting a loan might be just what you need to put your finances back on track, so speak with a Loans Canada customer care agent to learn more.