Bad Credit Loans: Applying for a Loan Regardless of the Score
When people hear about bad credit, the first thing that comes to their mind is the indebtedness of an individual and his inability to meet his regular expenses due to these debts. Technically, a bad credit refers to the low credit scores that the credit industry has rated you with, preventing you from acquiring more loans, with the exception perhaps of certain bad credit loans. Bad credit signifies the inability to pay previous debts on time, if they are paid at all. They may wither be sent from a high balance charges from collection agencies or may have filed bankruptcy.
What are the effects of having a bad credit rating?
• Having a bad credit means lenders are fearful of letting you borrow since you are likely to fall behind the loan or credit given. This causes your applications for loans to be rejected. This is also similar for applications of credit cards.
• Although there are cases that bad credit loans are still approved, the interest rates set are likely to be higher than usual. This is to pay the premium of risk of the lender from lending the money.
• Some insurance companies also use the credit score to assess the insurance rate to be given. In some cases, cell phone and utility providers even ask for an extra security deposit charge for applicants with a low credit rating.
It’s fairly easy to assess what’s the cause behind your bad credit. The credit report can be accessed using the credit bureaus provided by the government.
Ways you can fix your bad credit
Fortunately, fixing a bad credit can be done so it wouldn’t have to persist on a long time. First, you can concentrate on omitting necessary negative information from the credit report either by using a credit report dispute or repair technique. Subsequently you can focus on including more positive information on the report by putting newer accounts and giving payments on time.
How would you know if you have Bad Credit?
The credit score is a widely used metrics to assess the creditworthiness of a person. There’s no official cut-off between a good and a bad credit score but you usually own a bad credit rating if it’s less than 600.
Now, given a low credit rate, how would you still get approved bad credit loans?
Find out the difference between a secured and an unsecured loan.
A secured loan is a type of loan that has a collateral back up like a car, home or any other property. Unsecured loans, as the name suggests, are riskier and is not backed by collaterals. Therefore, they come with relatively higher interest rates. These are usually used for small time use of money like home improvements, purchases or for unforeseen expenses.
Be sure that you are fully aware of the terms of your loan. Some interest rates come fixed while others may change. Variable interest rates can be favourable if the rates go lower, but can be hard to predict.
Compute for the tax-time savings. You can subtract the interest on secured loans like student loans or mortgages. Unsecured loans usually have non-taxable interest.
Make sure you’re aware of all the payday loans.
Payday loans are small, short-term loans that are intended serve as buffer when you are short on cash. A check will be written for the amount you make use of, along with a charge for the loan and pay it to the lender, who will then cash once you have the necessary money to pay. Not being able to pay means you rolling the loan over, which would incur additional fees. The normal interest rates for such loans can even climb up to 500%.
Use a Home Equity Line of Credit
The recent financial crisis on home credit has left most people owing more than the worth of their own homes. Having equity in your real estate property could help you get tax-deductible, low-interest, line of credit to use in any way you like.
However, using a home equity would put your property at risk in case you can’t pay your debt. If you’ve financed your loan really well and you have a means of paying off the debt properly, then you can use this regardless of your credit score.
Use the Peer to Peer Loan
This type has been around for more than 5 years already. The P2P system is an online platform that permits you to have a loan directly from a person rather than from an institution. This has become very popular because lenders pay low interests while lenders earn a huge return.
The borrower would post bad credit loans while the investor would assess it. If the listing meets their criteria, the loan will easily be granted. Although the credit rating is still an important aspect in their assessment, these people might be more compassionate to a person’s situation.
Finding a co-signer would help in your application of bad credit loans, especially if the co-signee has a very reputable credit score. Although this is not a guarantee, some institutions would consider the application in the event of multiple signees. Just make sure you have a proper agreement with the signee, in case you can’t pay for the loan anymore.
If all else fails, you can ask for bad credit loans from friends or relatives. This is the easiest way of getting a bad credit loans because they would definitely understand the situation, and in return, they would know where to find you in case you stop paying. You wouldn’t even have to haggle for the rate and amount, if you come to the right person for it.