When applying for unsecured bad credit loans, lenders charge you a higher interest rate because these loans are not guaranteed with any asset and so the lender is taking a higher risk. Unlike secured loans, the lenders cannot take legal action against a particular asset in case you default on your loan and other legal actions are too costly and time consuming.
The Proper Solution
Unsecured bad credit loan is an appropriate option for those who have a bad credit history, or for those who want to establish one. There are plenty of high risk lenders who grant unsecured bad credit loans for people with bad credit. Along with these loans, they also offer cash out refinance loans, home equity lines of credit and debt consolidation loans. These loans often help you to pay back your debts on time and also help to enhance your credit history.
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Since lenders of unsecured bad credit loans do not require any security in the form of house or other property, you need to have a good recent credit history, even if your credit score is low. The credit company or lender will perform a credit check in order to determine the amount of risk involved in lending you the money. When you are considered a risk by banks and various lenders or financial institutions, unsecured bad credit loans can help you.
Qualification
There is certain criterion by which lenders judge your credit worthiness and then grant you a loan. They won't overlook your credit history completely. Many lenders calculate your credit worthiness by looking at your application and credit report and after that they determine the amount of money they can lend you. If you are amongst those who pay their monthly bills on time now, even if you missed payments in the past, then you can opt for unsecured bad credit loans without worries. Other factors that can help you get an unsecured bad credit loan are: a reduced amount of outstanding debt, a long length of credit history and few open lines of credit.
Co-Signer
Unsecured bad credit loans do not need any collateral, thus, in order to reduce the risk involved for the lender and guarantee approval you can offer a co-signer. Both the income and credit score of the co-signer will also be taken into consideration for loan approval thus boosting your chances of getting approved. The co-signer reduces the risk because if you fail to meet the monthly payments, he is also obliged to repaying the debt. As a co-signer of the loan, he is also a debtor and could suffer legal consequences if both of you defaulted on the loan.
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