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There was a time when a bad credit score effectively meant that getting a loan was impossible. However, these days there is always a chance to turn a financial struggle around and gain a good credit rating. It is widely accepted that personal loans help people with bad credit, and provide a ladder to a good credit score.
It is not really possible to guarantee personal loans with low credit, but there are some things that can be done to improve the chances of an application being successful. While there is a list of conditions that must be met, the fact is that there are ways around some of the more problematic issues.
The first thing to do is to understand what some of those issues are, and by knowing what to look for, personal loans are more likely to be approved, with bad credit no longer being a debilitating factor.
the reason a loan is declined
There can be few reasons for the loan application being rejected by the lender. While it is certainly true that a personal loan helps people with bad credit on their way to financial recovery, the application needs to be carefully structured in order to appeal to lenders.
Bad credit can cast the applicant in a bad light, thereby reducing your chances of getting a guaranteed personal loan with bad credit. However, low ratings are not always due to irresponsible money management.
Stating that circumstance was the cause of the score drop, such as a loss of income, job loss or even an unexpected financial emergency, can put the score in the lender’s context. It is not uncommon to see personal loans with bad credit being approved.
By stating the purpose of the loan, lenders are assured that money is not to be wasted on unnecessary things. After all, personal loans help people with bad credit, pay off credit card debt, or pay off sudden medical bills, but are irresponsible for financing a vacation to Las Vegas.
Finally, the size of the loan being applied for is telling, with lenders understanding that the applicant is undertaking a structured approach to dealing with their bad credit.
why small loans work
The fact is that the closest thing to a guaranteed personal loan with bad credit is a small loan. The lender sees that the applicant has avoided the temptation of looking for a huge amount, and has instead opted for a loan that is easily repayable. For example, a $2,000 loan might be paid off within a year with repayments of only $200 per month. It is affordable and can be quickly repaid in full.
While $2,000 may not pay off all existing debt, the main benefit is that it provides an easy way to improve credit ratings. In this way, these small personal loans help people with bad credit, thereby giving them an edge in the rating table.
type of short term loan
There is a range of short term and small personal loans to choose from. Collateral is one way to make a guaranteed personal loan with bad credit possible, as it provides security for the lender. But an unsecured loan without collateral is likely to be higher.
Other short-term loans approved with bad credit may only be a year or less, but cash advances or pay day loans may be just a few weeks in duration. These are issued on the basis of upcoming pay cheques, the next coming when the loan is paid in full.
Such personal loans help people with bad credit, but the terms and conditions are telling and the right one should be chosen carefully.
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