Bad credit, no guarantor and unemployed loans sound terrible independently, however, what makes it even more difficult is the case when all the above-mentioned categories are applied into a single loan. It may sound difficult which it is. But, it is not impossible, and this blog seeks to outline various issues regarding the same ranging from how those conditions affect a borrower‘s capacity to borrow and how one can borrow effectively.
Unemployment’s indirect effects?
Being unemployed although not directly but indirectly lowers one’s credit score. It could result in piling up debts and credits. For the lenders – lack of a stable source of income of the borrower minimises the degree of security one has regarding his or her loan repayment. As such, extending a credit facility to unemployed persons is considered a great risk. Consequently, the amounts offered through ‘instant loans for unemployed’ are significantly lower than those that are available to persons with a more reliable source of income.
Can unemployed persons with bad credit ratings access loans with no guarantors?
Having a guarantor provides more security and increases the chances of loan approval. This is because guarantors undertake to repay in case the borrower fails to repay within the time frame agreed upon. Being unemployed, having a bad repayment history and no guarantors are indicators of a clear red line that very few financial institutions will have the guts to cross.
Luckily, the financial sector has experienced some radical changes over the recent past, and presently, the unemployed, just like any other person, can access loans at the comfort of their homes, without any guarantors and regardless of their credit ratings. This has been made possible by the emergence of numerous online money lending institutions with more flexible terms from those that characterise traditional financial institutions.
The interest rates attached to these loans are however higher compared to those attached to loans from conventional financial institutions. This is understandable since the risk is also higher for the former than the latter situation.
Does having no guarantors affect the loan limit?
As stated herein above, the availability of guarantors provides more security since in the event the borrower fails to repay, the lender can claim the outstanding obligations from the guarantor. It, therefore, implies that lending to a bad borrower who has no guarantor(s) is highly risky. To mitigate this risk, lenders avoid extending large amounts and the low amount they lend are attached to high-interest rates.
Why offer loans to unemployed persons with bad debts and no guarantors?
Despite the foreseeable risks, some institutions still extent loans to unemployed persons with apparent poor credit ratings and even without any guarantor. The reason behind this is that the financial sector has been blocked by too many players and competition is getting stiffer. If a borrower’s application or proposal is declined by a lender, chances are that the other will approve it. As such, each and every client is treasured since the ones that are turned away are readily embraced by others.
Online lenders, as well as mobile banking services, have also contributed a lot to the above. They do offer similar services to the ones offered by the conventional institutions making it more difficult to turn away clients regardless of the credit unworthiness.
Whether this is good or bad depends on the person you ask. For traditional financial institutions, it’s obviously a bad thing since it exposes their financial standings to numerous risks. On the other hand, it’s a good thing for the borrowers since it enhances financial accessibility and inclusivity.
How can the unemployed with bad credit ratings access large amount loans?
There are other forms of securities that borrowers who fall within this category can rely on in the event they intend to borrow large sums. Opting for secured loans is one of them. To access a secured loan, borrowers have to deposit some of their properties to the lenders as collateral. In addition, the borrowers have to prove that they hold proper legal titles over the properties deposited.
In the event of the borrower’s default, the lenders retain the right to sell off the properties deposited by way of an auction in order to recover the unpaid amounts. The properties deposited must be of worth enough to repay the amount borrowed in full plus interest charged on it in the event the borrower does not repay the entire sum. Upon the borrower defaulting partially, the lender is not obligated to sell the property deposited at its full value but only at the value that would cover the outstanding balance.
So, whether you are a lender or a borrower, it is important to evaluate the risks involved and know that a deal is two-way street, which needs to be dealt with utter professionalism and care.