Loans come in handy when you have an emergency, but it can be hard to obtain funding when you have bad credit. This is because the credit report is one of the factors lenders look at when accessing the borrower’s ability to pay back without defaulting. Hence, it’s always advisable to maintain a good credit report as it boosts your chances of getting approval fast. A good credit score can also allow you to borrow more at a lower interest rate.
If you have made bad financial decisions in the past, there are steps you can take to improve your credit score. Consider paying off existing debt, paying your bills on time, cancelling the credit cards you never use and keeping your credit utilisation low. By doing so, you can improve your credit score and increase your chances of getting funding with favourable terms. One of the key drawbacks of the loans you get with bad credit is that they are most likely to come with high interest rates. With a good score, you can avoid such high costs.
When you need a loan fast but have bad credit, consider the following tips.
Start by Checking Your Score
It’s always a good idea to keep checking your score often. By doing so, you can know where you truly stand, identify any mistakes that need correction and even check for fraudulent activity. Therefore, if you haven’t done so recently, start by checking your score before you contact any lender.
Identify How Much You Need and Why You Need It
If you need to make an urgent purchase, check the exact price from your preferred supplier. If it’s a project that needs to be done by someone, get a quotation. If it’s an expense, check exactly how much you need to cover it. By identifying exactly how much you need, you can avoid borrowing more or less than you need.
Explore Your Options
There are a couple of places you can get money if you have bad credit. Examples include online lenders, credit unions and credit cards. Take time to list down a few places where you may qualify for a loan. Checking the loan limits, terms and requirements can be helpful when selecting the most ideal lenders. For online lenders, the key benefit is that you can find lenders fast and approval can take minutes. You can also easily find bad credit lenders through brokers such as New Horizons as shown on this website. New Horizons is a regulated credit broker, working with a panel of loans for bad credit lenders, payday loan lenders and small loan lenders among many others.
Most credit unions have a reputation for lower rates on loans and higher rates on savings. With a credit card, especially when making a direct payment or purchase, you can get benefits such as purchase protection, convenience and fraud protection. However, even though each method is beneficial, the terms for each may not be favourable for you.
Most online lenders will give you a free online quote and you will also have access to other terms before making your decision. Take your time to compare quotes and terms from different potential lenders to choose the best. Find the lender with the best interest rates and payment terms. Read the terms carefully to avoid getting a loan you won’t afford to pay on time. Also, as you compare, don’t forget to check the reputation of the lender. Be especially careful with the lenders you find online and anyone else you don’t have a past relationship with. This is because some of them may turn out to be scammers and fraudsters. When you give your details, ensure you are sharing them with a legitimate and reputable lender. Fraudsters know how to take advantage, especially of people who need the money urgently.
Consider Guarantor and Secured Loans
Having a guarantor or security can give the lender assurance that their loan will be paid back. This increases your chances of getting approval even when you have bad credit. However, note that when you give your asset as security, you risk losing it when you don’t pay back on time. Also, if you don’t pay back a co-signed loan on time, you could end up stressing your co-signer. Therefore, consider such loans only when you are sure you will be able to pay back the money on time.
As you apply for a loan, have a solid repayment plan in place. If you can, find ways to boost your income so that you don’t fall behind with your payments. Finally, as stated earlier, don’t forget to work on improving your credit score. Your next loan application is more likely to be less stressful when your credit score is good. Having an emergency fund for the unexpected expenses is also a good idea to ensure you don’t always rely on loans when you need some extra cash.