How to Qualify for a High Risk Personal Loan

High risk personal loans are usually extended by high risk lenders who will asses a greater interest rate due to the greater risk involved. These loans can be used to pay emergency medical bills, get through a difficult time after losing a job and other forms of immediate financing. They are considered high risk because the borrower has poor credit and is not securing the loan with an asset. Qualifying for a high risk loan depends on factors other than a credit rating for this reason.

The Role of Credit

Your credit score will play a role when the creditor determines if you are high risk. Typically, a borrower with a score between 600 and 700 will be medium to high risk. Under 600 will usually be deemed high risk, and a specific high risk loan will become necessary. Because you have bad credit, you can expect it will be harder to get a loan, even from a high risk lender. You should also expect the loan to be more expensive. 

One further issue arises in the terms of the loan. A bad credit, high risk borrower is often more apt to seek loan modification in the future. Lenders are aware of this trend and create disincentives against it. This means your loan terms will usually lock you in and cost you greatly if you decide to modify the loan in any way including refinancing, consolidating or settling. 

The Role of Salary

You are evaluated based on your financial strength when you seek a loan. If you do not have a good financial record or a good FICO score, your current salary becomes more important. Aim to maintain employment for at least two years in a steady job before seeking a personal loan. It is best if you can show consistently increasing salary in those years as an indicator you have job security.

You may also choose to have your employer provide a letter of recommendation for your loan. Depending on your relationship with your employer, this may be easy or difficult. If you are able to ask for a recommendation, however, it can be effective additional information for the lender to hear from your employer you have stable employment and a constant salary. 

The Role of the Application

A good application is very important for a high risk borrower. Your application for a loan should be treated the same as your job application. This means you want to put your best foot forward, neglecting no information, and presenting the application as professionally as possible. If you are going in for a loan application interview, dress your best, be careful of personal grooming, and act as if you are heading into a job interview. 

Choosing the right information to include on your application is also important. Do not overwhelm the lender with supplemental materials. Choose those materials, such as reference letters, based on how they will strengthen your application and help you stand out from other applicants. A letter explaining why you have a bad credit score is helpful if the situation is fairly straightforward, not if you were simply irresponsible in the past. 


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