The chances of securing large unsecured loans are impacted negatively by bad credit ratings, but they are not written off completely. In fact, credit scores have become largely irrelevant, influencing the interest rate to be charged but little else. So, even getting a $20,000 personal loan with bad credit is possible, if the application is strong enough.
The truth is that credit scores no longer indicate the trustworthiness of an applicant very accurately. Even honest borrowers have been hit by the recent economic crises, and have watched their own credit ratings fall. They are trustworthy, as long as the loan is affordable, so they have a good chance of securing loan approval.
Even when it comes to applications for large personal loan, the score plays only a minor role. The more important issues to lenders is employment, income and the state of the debt-to-income ratio. If these are in order, then the likelihood of getting the thumbs up is pretty good.
The Key Issues to Consider
The key issues to consider when structuring your own loan application have to fit with the necessary standards if there is any chance of securing a $20,000 personal loan with bad credit. But then, that only makes sense, with income a basic requirement, a strong debt-to-income ratio ensuring affordability, and the availability of security reducing risks.
Having a reliable source of income means the applicant has a clear ability to make repayments. However, employment needs to be full-time, and most lenders insist that the job have been held for at least 6 months before the application is submitted. For the self-employed, securing loan approval is dependent on tax returns.
The debt-to-income ratio is even more significant, however, since it confirms what sized repayments sums are affordable. Calculated by taking the total monthly expenditure from income, just 40% of the excess income is allowed to be used for repayments on a large personal loan.
The Value of Security
The biggest issue for lenders is getting their money back, so once they feel certain this will be the case, approval is just a formality. Offering security effectively removes the element of risk, making approval extremely likely, even for a $20,000 personal loan with bad credit.
There are two forms of security, with the most obvious being collateral. The problem with collateral, however, is that the item offered up has to match the value of the loan. So, for a $20,000 loan an item (or items) worth $20,000 has to be offered. Securing loan approval in this way does work, but it is not always practical.
A better option is to find a cosigner, someone who can guarantee the repayments on the large personal loan will be made without fail. The only issue here is whether the cosigner is accepted. Having an excellent credit history, and a large income should do the trick.
Considering the Lender
Of course, the choice of lender has a big say in approval, since it is the lender that sets the terms of the loan deal. When applying for a $20,000 personal loan with bad credit, most traditional lenders are unlikely to grant approval because of their strict lending policies.
However, online lenders are a better choice. These lenders are well-known for lending terms designed with bad credit borrowers in mind. As such, their interest rates are lower, and their repayment terms longer, ensuring that the repayment sum is affordable.
Another option is a subprime lender. These are more expensive as they charge higher interest rates. But securing loan approval is practically certain, and longer terms keep the repayments low. When seeking large personal loans, these are is a key considerations