Financial establishments look at the borrower’s income and debts. They pull the applicant’s credit report to check the amount of debt the borrower has. Overburdened borrowers are high-risk clients for many creditors, and they will either reject the application or offer unfavorable terms and conditions. Having multiple, high-interest debts shows financial institutions that borrowers are unable to manage their finances. Income is also an important factor when applying for bad credit unsecured loans. Financial establishments are interested in what the applicant’s salary is, where they work, and whether they have other sources of income. Child support, alimony, and earnings from a second job are considered sources of additional income. Financial institutions usually call employers to verify whether borrowers work there.
It is important to understand the criteria for obtaining bad credit unsecured loans so that you have a good chance of having your application approved. Unsecured loans differ from secured loans, and financial institutions will look at your credit score, debt load, income, and the amount of the loan requested.
Applicants may have to meet minimum income requirements as well in order to prove they will be able to manage with payments. Financial institutions also compare borrowers’ income and debt load to find out their debt-to-income ratio. It will play an important role in deciding whether to have one’s application approved.
The borrower’s credit rating is also important, and financial institutions pay close attention to it. The situation is different with secured loans because even if financial institutions make a bad decision, they can seize the property pledged as collateral and recoup the losses. In addition, financial institutions have their own criteria regarding acceptable credit scores. Borrowers with poor credit scores, i.e. those who fail to meet the bank’s requirements, may ask a close person to cosign for them. The financial institution will ask the cosigner to present recent paystubs. It should be mentioned that not all financial institutions offer cosigner loans.
Age is another important requirement financial institutions take into account. Unless borrowers obtain a loan from their employer or from a family member, they have to be of the age of majority (18 years of age). Creditors will request proof, for example, a photo ID or a driver’s license.
In most cases, borrowers need to have a savings or checking account. This is valid for military loans and payday loans, for example. Once the term of the loan is over, the financial company withdraws the money from the savings or checking account. Most lenders require that borrowers have their paychecks deposited through direct deposit so that they can withdraw the money when the loan is due.
Note that any missing documentation or information on the loan application may delay processing. Financial institutions reject applications that contain incorrect and false information. Get the facts about payment with credit card by checking out this unsecured credit cards guide.
