It-May-Seem-Ludicrous-That-Lending-Institutions-Ar30

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It-May-Seem-Ludicrous-That-Lending-Institutions-Ar30

  1. 1. It may seem ludicrous that lending institutions are willing to approve $10,000 personal loans forpeople with bad credit when the risks involved are so high. After all, does a low credit score not indicate a lack of trustworthiness on the part of the borrower? Does it not mean that the loan is almost certain to be defaulted upon?sky loans
  2. 2. Well, the short answer to both of those questions is: No There is ageneral misconception that a low credit rating means the applicant cannotbe trusted, and so lenders who provide large loan approval are asking fortrouble The truth is that the economic crisis has seen many honestpeople develop poor credit ratings This has forced a change in thinkingamongst lenders, with the reliance on credit scores is no longerparticularly strong These scores are only used as an indication of whatthe best interest rate to charge is
  3. 3. Only then can it be calculated if the $10,000 personal loan, for example,is affordable But how are such large loans affordable for theseapplicants, and how can lenders avoid making huge losses? How TheseLoans Are Affordable Calculating whether or not a loan is affordablecomes down to two factors: the income and the interest rate When itcomes to $10,000 personal loans for people with bad credit it might seemthat the application is doomed, but in fact this is not always the case Theinterest rate is influenced by the credit score of the applicant
  4. 4. The simple rule is that the lower the score, the higher the interest rateThis can translate to a difference of a few hundred dollars in monthlyrepayments A borrower with an excellent score of 700 may pay $500,while a borrower with a low score of 450 faces repayments of $750Large loan approval might seem out of reach for the latter, but whatmakes these repayments affordable is not the income that is earned, butthe amount of income that is free to cover the repayments
  5. 5. To this end, the debt-to-income ratio on a $10,000 personal loan isessential The Debt-To-Income Ratio This ratio is used as a guide bylenders to ensure borrowers are not allowed to over-extend themselvesWhile $10,000 personal loans for people with bad credit can be alifesaver in these difficult times, repaying the loan can become difficult ifsome unexpected bills come through the door What the ratio does isprotect the borrower by ensuring a percentage of their income remainsavailable for such eventualities
  6. 6. So, medical bills after a sudden illness can be paid, for example Onlysky loans when this is protected can a large loan approval be deemedpossible The debt-to-income ratio is set at 40:60, which means that nomore than 40% of the available income can be used to repay the $10,000personal loan So, an applicant earning $5,000 per month may not getthe green light, while an applicant on $3,000 might be approved
  7. 7. Realistic Loan Applications Every time a lender approves a loan, theyare putting themselves at risk It is the nature of the game So, it is fair tobelieve a $10,000 personal loan for people with bad credit is asking fortrouble But with debt-to-income ratio and interest calculation taken intoaccount, they have protected their interests quite well
  8. 8. The only remaining aspect is to entertain only realistic loan applicationsLarge loan approval is fine so long as the large sum is not a crazyamount For example, while a $10,000 personal loan may be approvedfor an applicant with a poor credit history, the chances of approving a$50,000 loan are extremely low - unless there is collateral provided, ofcourse
  9. 9. sky loans

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