Top Reasons Unsecured Loan Applications Get Approved Despite Bad Credit

Top Reasons Unsecured Loan Applications Get Approved Despite Bad Credit

Obtaining an unsecured loan in Ireland can be challenging for individuals with a bad credit score. It is due to the strict affordability and eligibility criteria set by the loan companies. It prevents borrowers from entering a debt trap. The blog explains the key factors that help you. Get a practical insight and evidence-backed explanation. Thus, it may help you apply correctly for the loan.

Why do loan applications get approved despite a bad credit score?

Here are some reasons the loan applications get approved regardless of the credit score:

• Repayment capacity over credit score

  Most loan companies analyse the borrower’s finances to understand whether they can afford the payment or not. They review the borrower’s income, monthly finances, employment stability, and residential status, as well as their disposable income.

  It helps them decide that you can afford the loan payments without putting your finances at risk. Thus, if you have a high, consistent and reliable income, you may qualify for an unsecured loan with bad credit. The basic concern is that you should be able to make repayments while meeting other commitments.

• Stable and Adequate income

  

  One of the most important predictors in loan approval is credit score and income. With bad credit, you must ensure a high income. It should be high enough to support your loan payments without sabotaging basic needs.

  Individuals with a valid, regular and high income may qualify for the unsecured loan quickly. Here is what it means:

  • Salaried employees must have a valid pay slip
  • Self-employed individuals must provide verified earnings proof and self-assessment over time
  • Check secondary income sources that improve affordability
  • Your debt-to-income ratio must not exceed 30%. It is the ratio of debts to the total monthly income. Lowering one increases your loan affordability and helps you get one quickly.

• Borrowing a small amount

  Small loan amounts are less risky than large ones because of the potential loss. It is especially true if the potential loss in the case of default is limited. It reduces the risks for the private loan providers.

  Moreover, borrowing a smaller amount also slashes the interest liabilities. It helps you ensure comfortable loan repayments. You can choose the repayment structure according to your needs and finances.

  You can also choose a longer repayment term if you want to improve your credit history and reveal positive payments in your credit report. It increases the chances of getting a loan with better interest and terms in the future.

• Updated credit profile

  It is important to have an updated credit profile before applying for an unsecured loan. It increases the chances of getting a loan. Check whether you have any delinquencies which may affect the loan approval. Identify double entries, wrong entries or the paid debts.

  If the debts you paid still reflect as unpaid, report them to the major credit agencies. Getting an updated credit report may take over 30 days. However, you may get one with an improved credit score and other aspects. It reduces the risk of disapproval on your new loan applications.

  Types of credit report errors	Experian	Equifax	TransUnion
  Incorrect personal information	May show incorrect personal details that do not match your identity	Can contribute to mismatched credit reports that may require correction	Personal information errors may appear and may affect the payment history
  Closed accounts are shown as open	Can list accounts as open when they have been closed, skewing utilisation and age of accounts.	The same type of error can occur.	Accounts not updated promptly may appear active.
  Duplicate Accounts or Entries	Could show the same account twice (especially if reported under different names).	May list duplicate lines when you send the same credit multiple times.	Duplicate entries are possible and can inflate perceived debt.

• Reveal responsible financial behaviour

  It is very important to reveal that you can repay the dues on time. Otherwise, it may affect the loan approval chances for bad credit unsecured loans. Demonstrating the affordability lies outside the credit score requirements. Aspects like these improve the loan approval chances:

  • On-time payments
  • Salary
  • Low credit card balances
  • Low credit utilisation ratio
  • Limited debt

  These aspects increase confidence in your credit report. Hence, it reveals the potential to manage the credit wisely. Being on top of your payments may help you get instant cash loan approval in Ireland. You just need to continue the responsible financial behaviour to secure current and future loans without difficulties.

• Apply to loan providers with a high risk appetite

  Yes, every loan company has its own risk appetite. One needs to research a lot before finding that perfect loan company. Or, you can simply turn to a loan brokerage firm that may help you spot the right loan firm with the highest risk appetite.

  The higher the risk appetite, the more chances you have to qualify with a poor credit score. Such loan companies consider present bank statements and finances, rather than historical credit alone.

  The prime examples include:

  • Loan companies use soft credit checks and automated checks
  • Subprime divisions of established financial institutions
  • Fintech platforms that access credit differently.

• Prefer manual underwriting

  Undoubtedly, automated credit checks and affordability assessments help you get the loan quickly. However, you may lose the benefit of the loan company’s favour in that case. Every loan provider analyses the application for the potential for loan approval if your application is reviewed manually.

  Human underwriting can mitigate the circumstances. They may determine aspects like- reduced debt, improved income and a detailed explanation of the past dues. It may help them analyse your affordability correctly. These improved aspects may help you get the loan quickly than the automated aspect.

Conclusion

These are some of the best reasons unsecured loan applications get approved despite a falling credit score. You must work on your finances and strengthen them before applying. Check income and ensure a valid proof with consistent employment history. Determine debts that you can pay and do so. It may reduce the risk for the loan provider. Moreover, doing so also increases your credit score. Reveal responsible financial behaviour to get approval with low interest and terms.

Ava Nolan

Ava is Editor-in-Chief at Givemyloan and is known for her deep and practical approach to modern personal finance. She has written several articles covering topics like personal loans, business loans, etc. Coming from an economics and finance background, she has worked behind the scenes to curate informative content to help borrowers identify the right loan option.
Ava’s role at Givemyloan lets her combine her interest in writing with her curiosity to explore the finance realm. She likes to be updated about what is happening in the lending industry. Most importantly, she tries to instil her knowledge in her writing in the best way possible.

She is passionate about helping borrowers look beyond the general features of a loan, i.e. about the fees and other intricate details. When she is not writing, she likes to read contemporary fiction. She is on a mission to help educate people looking for loans so that they take the right route.