There is no point in pretending that bad credit borrowers have an easy time of it when trying to secure loan funds. Most lenders are still reeling from the financial crises that have occurred over the last 5 years, and as a result are reluctant to grant approval. This is especially true when it comes to applicants seeking $10,000 personal loans with bad credit.
There are criteria and conditions to every loan on offer, but securing loan approval when the applicant has a poor credit history, or is clearly in financial difficulties, is far from straightforward. Usually, some extra effort is needed to compile an application strong enough to be approved.
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However, another key part to the process is to select the right loan to apply for, and the right loan source to apply to.
Thankfully, no matter what your financial situation, there are options that make even large personal loans attainable. Here are 3 of them.
1. Signature Loans
A signature loan is another name for an unsecured loan because it is granted only on the basis that the applicant promises to make the required repayments by putting their signature to the loan contract. When seeking a $10,000 personal loan with bad credit, this is not the ideal loan option.
Effectively, the lender only has the income of the applicant to use as an indication that the repayments can be made, and in the absence of any security, it is the lender who carries all of the risk. As a result, the interest rate charged on these loans is higher - usually around 11%.
What is more, the chances of securing loan approval are low because of the size of the monthly repayments on a $10,000 loan. It may be easier to get a smaller sum, but getting one of that size would require a strong debt-to-income ratio and clear signs that the large personal loan is affordable.
2. Home Equity Loan
When applying for a $10,000 personal loan with bad credit, the best way to ensure approval is to offer some form of security. The best kind is that associated with realty, rather than some possession of worth - like jewelry or a car. With that in mind, home equity is the best to offer.
Home equity is the share of the value of your home that is not covered by the mortgage. If the balance on your mortgage is $150,000, and the value of your home is $200,000, the equity is $50,000. And because of the strength of property as security, the chances of securing loan approval are extremely good.
Because the typical value of equity on a home is high, it is not difficult to have enough to cover a large personal loan. In fact, some lenders are willing to offer loans with just 25% covered by equity. Therefore, $10,000 in equity is enough to secure a $40,000 loan.
3. Private Loans
When lending institutions (either traditional or alternative) are unlikely to offer good terms, it may be worth turning to private loan sources, like your own family. In fact, it is arguably the best options when seeking a $10,000 personal loan with bad credit.
Family members rarely charge interest, so the repayments are lower than even an online lender would charge. And with family members also more accessible than any lender, the chance to renegotiate repayment terms should difficulties arise is greater too. All in all, securing loan approval is more likely and the terms are better.
The only negative factor is that the loan is outside the lending industry, so no improvement can be made on your credit rating even after such a large personal loan has been repaid in full.
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