Applying for a personal loan can be a straightforward process if we've been able to maintain payments to other providers in the past. However, some of us can be tarred with past mistakes, and often find that there are not many avenues to turn down when it comes to finding a personal loan with bad credit.
Fortunately, there are providers that accept that not everyone with past problems is looking to miss payments purposely, it can be due to difficult circumstances. As such, these types of lenders can offer a solution, although there may be a slightly different application process depending on the lender you choose.
How Do I Find Lenders That Suit My Needs?
There are those with a blemished credit history who may feel ashamed, so therefore avoid applying for any type of loan. The thing to remember is that if you have had financial problems in the past, then it's likely that there are a lot more people with the same set of circumstances, which is why there are providers that are able to help applicants who may have a less-than-perfect credit score.
The first thing we should do is check our credit score. There are many avenues to do this, with some of the options being completely free to use. Once you have looked over your credit report, you should be able to ascertain as to what's making your score decrease. This allows you to be open with any potential lender from the outset.
It can also help to put together an income and expenditure form so you are able to see your incomings and outgoings. Not only does this make life easier for you, but it can also show your potential lender that you have made efforts with maintaining a budget.
Don't Apply to Several Lenders
This follows on from checking our credit report. Essentially, we should only be looking to make an application with one lender as opposed to several. The reason for this is because applying for a loan with several lenders can mean that we're rejected in some circumstances, which in turn can make it harder for us to obtain a loan, even with selected providers.
If you want to make a personal loan application with a lender, but still have some questions, be sure to contact them beforehand. Some may be able to assess whether you fit their criteria before making an application, which means that you're not leaving a series of detrimental footprints all over your credit file.
It is much wiser to check your chances of getting credit by doing a soft search with lenders. Tools such as Money Saving Expert's Eligibilty Tool are a good place to start.
Ascertain as To Whether Your Loan in Secured on Unsecured
When applying for a personal loan, it's vital that we understand what terms and conditions are associated with the loan. One of the major factors to consider is whether your loan will be secured or unsecured. An unsecured loan may be more difficult to find if you have a blemished credit history, but it will mean that no assets are secured against the loan. A secured loan may be easier to acquire, but it may mean that your home or other assets are at risk should you fall behind with payments.
Be Sure to Check Your Interest Rate
Those with bad credit will find that they will pay more APR on a loan than those with a healthier credit rating, and it comes down to the risk involved.
While you can expect to pay more interest, you shouldn't assume you must pay unrealistic amounts. When applying for a personal loan, you should ask how much the repayments are including the interest. This will ensure that you're able to make the repayments, as well as ascertaining how much interest will be applied to the personal loan overall.
Can Bad Credit Personal Loans Help Repair Credit?
Looking for personal loans often means we are met with series of different marketing material. One popular claim about bad credit personal loans is that they can help rebuild your credit file, and in part this is true.
Your credit file is simply a reflection of your credit commitments and will reflect how repayments are made, and whether they are made on time. So, if you take out a bad credit personal loan, and this is your only credit commitment, then it should be easy to help rebuild your credit file over time. However, you shouldn't assume that taking out a bad credit loan will instantly give you a better credit score, it's all about ensuring payments are made, regardless of whether it's a loan or a mobile phone contract.
Are You Applying with a Broker or a Lender?
While there are loans available for people with bad credit, some people can be asked to pay a charge when applying for a personal loan. In many instances, this can mean that you're using a loan broker. While this can be fine, it's important that you are fully aware it's a broker you're using.
Using the wrong type of broker can mean that many applications are made using your details, making it less likely that you will get a loan. Many may also find that there have been charges made to their debit card.
When cash is in short supply, it's human nature for us to hit the panic button and apply anywhere that seems feasible, but we need to keep our wits about us. There will be many lenders who will be able to advise you as to whether you're eligible for a loan or not without having to ask for payment in return. Paying out numerous fees in your search for a loan can also mean that you're left with less money than before, putting you in a worse financial position than you were before.