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Lenders have to accept a certain degree of risk whenever they approve a loan. When they grant a loan to a bad credit borrower, this is especially true. So what about when an applicant is seeking to get an unsecured personal loan with bad credit? Surprisingly, even with no collateral, applicants have a chance if their application is convincing enough.


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Understand, however, that lenders are no fools and with every loan agreement signed, they are set to make a handsome profit. Granting loan approval with no collateral used as security is simply another gamble, but one that is not made with just any applicant. There are strict terms and conditions applied to the deal.



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What this means is that any applicant stands a chance of getting an unsecured personal loan if they first develop an application that meets every concern the lender might have. And once the necessary boxes are ticked, then approval follows.
Why Collateral Can Be Overlooked
Everyone knows that collateral makes a huge difference when it comes to getting a loan approved. The reason is that, with the risk of losses adequately covered, the lender stands to make their money whether the borrower defaults or not. Therefore, granting an unsecured personal loan with bad credit makes little difference.
Collateral is extremely useful, but the problem is that not everyone has assets to hand that match in value the required sum. If the loan is large, like $20,000, finding an item worth $20,000 to use as collateral can be very difficult. Sums of $5,000 might be less troublesome.


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This means that a market exists for lenders willing to grant loan approval with no collateral. Online lenders have addressed this niche successfully, not only by being willing to give the green light to large unsecured personal loans, but by charging competitive interest rates and offering flexible repayment schedules.
Making Unsecured Loans Viable
The reason that these loans can be offered in the first place, without the lender going bankrupt, is that the terms are designed to reduce the chances of borrowers defaulting. While traditional lenders may charge high interest rates to cover potential losses, online lenders offer unsecured personal loans with bad credit that are affordable.
Interest rates are only part of the formula, and can play its part in making the monthly repayment sum affordable. But offering longer repayment schedules means the principal sum is divided into more (and therefore smaller) shares to keep the monthly sum low. After all, repaying $10,000 over 10 years costs less per month than repaying it over 5 years.
If the monthly repayment is manageable for the borrower then the lack of security is irrelevant, so granting loan approval with no collateral is plausible. The only negative to this option is that the amount of interest paid over the lifetime of the loan is going to be more. And remember, due to its status, unsecured personal loans are never cheap.
Loan Terms To Consider
So, what are the key loan terms to consider? Clearly, online loans are the superior option because of the terms offered over the Internet. Even getting unsecured personal loans with bad credit is a simpler task thanks to the availability of comparison sites.
Online unsecured personal loans are also approved much more quickly, with some online applications processed in a matter of minutes. And the provision of your bank details means funds can be transferred directly into your bank account in a matter of hours.
To keep their advantage over traditional lenders, online lenders are more willing to grant loan approval with no collateral since greater emphasis is placed on income and employment status.