Yes, in fact, any person can avail of unsecured loans. There are lenders who offer loans for individuals who have a bad credit score. Even if the borrowers start the loan term with poor or no credit score, they could probably increase the score as time goes by.
We will first know about unsecured loans and then get to know if borrowers with bad credit score can avail the loan or not.
What are unsecured loans?
Unsecured loans are the loans that are not backed by collateral to guarantee repayment. These loans are high risk for the lenders as it is not secured against any collateral and if the borrower defaults the payment, there will be nothing to recover from the borrower. That is the reason lenders charge high-interest rates for these loans.
Borrowers with bad credit history
Few lenders offer loans for borrowers who have a bad credit history. These loans will pull you out of a financial emergency. Bad creditors are the borrowers whose borrowing options are limited due to their bad credit score. So, if you have a low credit score and need immediate money for some emergency payments, then you have a few banks who are offering loans for bad debtors.
Can borrowers avail unsecured loans with bad credit history?
Any person takes a loan to fulfill his financial emergency needs but a borrower who is having bad credit score wants unsecured loans when he has defaulted any previous loan payments, defaulted on credit card payments, has not at all taken a loan before or the previous loan that got rejected because of poor credit rating.
Unsecured loans are basically given to a borrower based on the income level, employee status, trustworthiness, credit score, etc. But few lenders do not consider the credit score and let the borrower avail the loan based on certain rules and regulations. The borrower has to fulfill other eligibility criteria in order to get the loan approved.
Benefits of Unsecured loans for borrowers with bad credit history.
1. No risk to the asset: The best thing about unsecured loans is that your asset or property is not under risk even if you default the payment. So, individuals with bad credit score can also apply for unsecured loans with no worry of losing the property.
2. Large borrowings: Unsecured loans can basically be used for many purposes, so large or high loan amounts can be availed from the lenders. The purpose of taking a loan is not asked by the lender, but it should be for a genuine purpose
3. Tenure period: The loan tenure period is flexible based on the applicant. It is not set for a time period but rather the borrower can pay according to his convenient.
4. Quick processing: Since there are no collateral documents to be submitted nor there will be credit history checking for individuals having a bad credit score. So, the whole loan process gets quick and doesn’t take much time.
So, with benefits being more in favor of the borrower, even with bad credit scores you can still apply for unsecured loans with no collateral required.