Many people have incurred poor credit ratings and now find it difficult to apply for credit, finance and loans with favourable interest rates.
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In addition to finding it difficult to source credit, finance or loans with competitive APR (Annual Percentage Rates), those with poor credit ratings often experience difficulties in a number of other areas, including higher insurance premiums.
What are bad credit loans?
A bad credit loan is the term applied to the loans lenders make available to prospective borrowers with adverse borrowing histories, usually as a result of being lax about their credit card or loan repayments in the past.
Many people have incurred poor credit ratings due to the financial crisis of recent years, though due to the nature of credit ratings and the manner in which they’re evaluated, everyone’s the same in the eyes of credit rating companies like Equifax and Experian.
Whilst anyone can apply for a bad credit loan, the factors lenders will be looking at most prominently, in addition to your credit rating, are your age – you must be at least 18 years of age to apply – and your employment status – lenders will likely contact your employer.
What you need to look for
There are a few things that you’ll need to prioritise when sourcing a bad credit loan to apply for, including the following:
Ø A competitive annual percentage rate (APR)
The interest rate, or APR, directly affects how much interest is incurred and therefore how much your repayments will be.
Although you might feel as though your options are limited because you have a poor credit rating, bear in mind that the number of lenders willing to work with borrowers with adverse borrowing histories is on the rise and that you’re likely to have more options available than you may have thought.
Ø The option to make extra repayments
You shouldn’t find it difficult to source a lender that allows you to make extra loan repayments without incurring additional charges.
Making additional repayments proves highly beneficial for a number of reasons, including repaying your loan more quickly, reducing the amount of interest incurred and mitigating the likelihood of you defaulting on your loan.
Ø Quick and easy application process
This doesn’t have long term benefits or consequences though there’s no reason why you should waste your time awaiting for a lender’s approval.
Most lenders make their application processes quick and easy to entice borrowers, so take advantage of this quick application turnaround time to dedicate more of your time to sourcing a competitive lender to apply to.
Applying for bad credit loans
Before applying for a bad credit loan you’ll need understand exactly what you should be looking for in a lender (discussed above), which of the many lenders that offer bad credit personal loans is the most favourable to apply to, plus you must also understand that by applying for a bad credit loan you have the opportunity to rebuild your credit rating – that’s very important.
Ø Do your homework
The first step when applying for bad credit loans is to do your homework into lenders offering bad credit loans because some are more advantageous to apply to than others, generally because they offer lower interest rates.
Use online comparison websites to compare bad credit loans with the aim of sourcing the most competitive lender to apply to.
Ø Rebuild your credit score
Rebuilding your credit score should be high on your list of priorities here; after all, it’s your poor credit rating that’s forced you to apply for bad credit loans with high interest rates applied so you need to take this into account.
Successfully rebuilding your credit score takes time, plus it must also be said that you cannot, repeat cannot, afford to miss or be late with a single repayment – this is of the utmost importance.
Consequently you need to be extra careful when applying for bad credit loans, so ensure you can comfortably meet your repayment commitments and that you have a backup plan, for example, an extra savings account into which you’ll make regular deposits just in case you’re running short one month.
Take note of these tips when applying for loans with bad credit.
About the Author:
A firm that recruits according to experience and expertise, Morgan Finance is a dependable lending company in New Zealand. They offer bad credit personal loans and debt consolidation services to clients.
