Financial mismanagement and certain unfortunate life happenings can easily mess up your credit score. When that happens, it becomes almost impossible to access loans. It becomes even harder when you have no collateral.
So, what happens when you have an urgent need for cash? High-risk personal loans can bail you out. But, what are they? And, how can you qualify for these loans? We have that and more. But first, check out some of the best high-risk personal loan lenders.
The money lending business in itself involves some level of risk. Despite having different mechanisms in place, lenders have no sure way of telling if you’ll repay your loan.
To make it easier, lenders classify their loans as either high-risk or low-risk. Borrowers with a poor credit score and no collateral are considered as high-risk. Whereas, the ones with a good credit score and/or with collateral are low-risk borrowers.
Simply put, high-risk personal loans are loans offered to borrowers with low credit scores without collateral. Lenders have no surety of repayment of these loans.
Many people fall in this category because of past financial mistakes or default on a previous loan.
However, there’s no need to panic. Many lenders offer these loans owing to the huge profits they attract due to their high-interest rates.
High-risk loans can help salvage your financial situation and take care of that urgent need for cash. The money can help you sort out medical bills, purchase an item, or even pay for your education.
Please take it only when it’s necessary and you have no other viable alternatives.
Lenders will verify various things before offering you a loan. The following are the basic requirements to qualify for high-risk personal loans;
Lenders will also look at your credit score. No need to panic, though. Even those with a credit score of below 600 still qualify for these loans.
However, a higher credit score will give you an added advantage. You’ll qualify for higher loan limits with lower interest rates and better payment terms.
You can also make it better by adding some collateral, guarantor, or cosigner with good credit profiles.
No income verification loans also called reduced documentation loans, are loan products that don’t require borrowers to prove their income.
Most borrowers miss out on traditional loan products because of unstable income, and mostly undocumented income.
However, for no-income loans, you don’t have to go through that documentation process.
The approval will be even faster if you have liquid cash or assets with a faster and higher resale value.
Please note that you’ll still have to prove to the lender that you can repay your loan. You’ll do that by proving that you have other sources of income.
Lenders may also look at your credit history, bank statements, and other assets you might have.
Assets such as vehicles, government bonds, and real estate will help you gain easy approval and establish to the lender that you’ll pay back their loan. So will retirement benefits, child support, unemployment income, among others.
However, no-income verification loans often carry higher interest rates and fees. Before settling for no-income verification loans, exhaust other sources such as friends and family.
Here’s a summary of the pros and cons.
Loans even for those with poor credit scores
They often carry higher interest rates
Approval is fairly easy and fast
You might pay higher fees
You don’t need employment income to apply
You have access to higher loan limits
Before taking high-risk personal loans, here are some things you should know;
A recent article in the Washington Post shows that about 20 million Americans are hooked up in this type of loan. The high number is due to its flexibility and ease of application.
Due to this, some lenders could take advantage of your urgent need for cash to charge high-interest rates and fees.
Be sure to shop around for the right lenders with fair terms before committing to taking a loan.
You can borrow from $1000 to $50,000 with high-risk personal loans. This can be higher or lower depending on different lenders. Most of them will use your credit profile and repayment history to determine how much you can borrow.
To increase your chances for higher loans, do your best to maintain a good credit profile by avoiding too many debts. Pay the ones you already have in time and allow some time to pass before borrowing others.
Having such assets as a vehicle or a home as collateral can also improve your chances of hitting a higher loan limit.
Alternatively, you can also get someone with a stellar credit score to co-sign your loan. Such a person acts as your guarantor and agrees to pay your loan in case you are unable to.
You’ll also do well to search for lenders with flexible terms who can stretch your limit and have affordable fees and charge fair interest rates.
Getting approved for loans isn’t the easiest thing. It gets even harder when you have a poor credit score.
However, there are lenders who will likely approve your loans from time to time. High-risk personal loans are one of the loan products you can easily qualify for.
Working on your credit score is the first step towards guaranteed loan approval. Pay your debts in time to be safer.
A good bank statement and a steady income will also more likely guarantee your loan approval.
When looking for a loan, shop around for the best lenders. Go for ones with flexible terms. Look for lenders who’ll consider other sources of income other than employment income.
High-risk personal loans aren’t the only sources of funds that can bail you out when in need of finances. Here are other sources you can try;
Yes. Your score is affected anytime your application for new credit is successful. However, frequent and timely payment of the loan will boost your score.
Yes. High-risk personal loans are meant for borrowers with a lower credit score.
High-risk personal loans carry an average APR of between 5.99 and 39.99%. Please note that lenders determine interest rates based on your credit profile and ability to repay.
You can borrow from $1000 to $50,000. But, the amount you borrow depends on the lender and your ability to repay the loan.
Repayment terms differ from one lender to another. However, top lenders will give you an average of 2 to 5 years to clear your loan repayment.