There is no denying that people with a poor credit history are generally treated differently as compared to people with a healthy history. In fact, there are financial institutions that will not look at you twice when the credit checks ascertain that you have bad credit. It is as if having bad credit is a bad omen of sorts that high street banks and other financial lenders want to avoid at all costs. Simply put, individuals with bad credit are deemed as a risk to the financial well being of an institution and that is why they are never approved for a loan no matter how pressed they might be for cash.
If you have been on the receiving end of one rejection after another, there are a number of alternatives at your disposal that might actually get you approved for a loan even if you have bad credit.
Provide your lender with collateral
If you have bad credit and are worried about getting rejected when you apply for a loan, the best way to have your application approved is by going for a secured bad credit loan. This is a situation whereby you pledge an asset of your own as collateral for the loan you are taking. Most lenders will overlook your credit score if you provide collateral as it doesn’t leave them with an egg on the face in the unlikely event that you default on repayments.
Though very much similar to banks or financial institutions, credit unions are slightly different in the sense that they are owned by members with something in common. These are individuals who may be working in the same profession or simply came together for a purpose. Ordinarily, credit unions advance loan facilities to members at very low interests. However, to get the best deal, it’s essential that you make comparison of various credit unions.
Seek for a loan from friends or family members
Have bad credit and have been denied access to credit from multiple financial institutions? Why not ask a friend or family member for an advance? The good thing about this kind of loan is that there are no credit checks and you will get access to loan at very low interest rates. The loan is based on a mutual agreement between the two of you and you don’t have to worry about spiraling interest rates as is the case with financial institutions. However, you need to keep your end part of the bargain as failure to repay on time might lead to strained relationships.
Get a guarantor
Getting a guarantor can get you approved for a loan even if you have bad credit. However, there are rules of engagement when it comes to getting a guarantor. For starters, your guarantor must be having a healthy credit history. Secondly, he or she needs to be aware of what they are getting into as they will be liable to repay your loan in the event you forfeit payment. However, if you have someone who can act as your guarantor, you will get approved for a loan even if you have bad credit.
The mistake many people make is going about the application of bad credit loans haphazardly. Most of the time, people don’t take the time to ascertain whether they are getting a good deal or not but are simply concerned about getting approved. In fact, some have been rejected so many times that they run to any given bad credit loan lender provided that they have been assured of approval. The end result is usually catastrophic especially when a person realizes that they got a raw deal or that the loan product they settled for is very exorbitant. So how do you locate the right bad credit loan lender? How do you ensure that you get a good deal without being exploited?
Take time to do proper research
Do not be in a hurry to apply for a loan without first ascertaining the reputation and reliability of a given lender. The popularity of bad credit loans has given rise to unscrupulous loan lenders out to swindle individuals of their hard earned cash. In this regard, there is every need and urgency for you to carefully vet various loan lenders before you do business with them. Comparison sites can be a great source of information especially for a person who is thinking of a taking out a bad credit loan for the first time. Such sites provide useful information on different loan lenders, the rates they charge, terms of loans as well as how past customers think of them.
With the internet becoming the center of everything in the universe, it’s very difficult for any business entity to operate incognito. Reviews can be found online of customers who have done business with a particular lender in the past. You can get to know how reliable and reputable a given lender is by reading a number of reviews left behind by customers who have done business with them in the past. Always go for a lender with great and positive reviews and whose acceptance rate is very high.
Read and understand the terms and conditions of the loan
Most people make the mistake of signing a loan contract without familiarizing themselves with the terms and conditions of a loan they are applying for. The effect is that at some point in the future they might find themselves dealing with hidden charges or unwarranted fees which they could have identified had they taken the time to read the fine print of the loan beforehand.
Talk to friends who have taken a bad credit loan in the past
If you are still not convinced, colleagues or friends that have taken a bad credit loan in the past can actually point you to the right loan lender based on their experience and charges applicable to a loan. You can ask them of their experience, how the bad credit lender deals with defaults, and the applicable interest rates among many things. However, it’s not advisable to take everything you are told at face value. You should always follow up with a research of your own to verify what you were earlier told.
Thanks to increased awareness and a change of attitude, people with bad credit are no longer considered outcasts. Days when bad credit was a taboo subject and talked of in low tones are long gone. The financial crisis that hit the world played a major role in changing the attitude towards people with bad credit. The perception that people with bad credit were out rightly financially irresponsible is nothing more than hot air. People are now aware of the fact that there are a number of things outside a person’s control that can actually make them have a low credit score.
That aside, if you notice that you have bad credit and facing problems getting approved for an ordinary loan, there are indeed a number of bad credit loans that you can get access to. What are some of these loans?
These are the kind of short term bad credit loans that do not require credit checks and are generally secured against a person’s pay check. They normally last between a week to even 100 days depending on the arrangement between a person and their lender. To apply for this kind of loan, a person needs to be 18 years of age, provide proof of income and be a resident of UK.
While these loans are a great alternative to people with bad credit, the only downside is that they have very high interests rates and attract a very high annual percentage rate. However, they are ordinarily approved within hours or 48 hours in the latest and are as such the best especially if you have bad credit and pressed for cash.
As the name suggests, logbook loans are the kind of bad credit loans secured against a person’s motor vehicle. What this basically means is that a person uses their car as collateral and can be advanced a loan on providing their logbook to the lender. Unlike other kinds of loans, you continue to make use of your car as you repay the loan. If you are interested in this loan be sure to use a logbook loans calculator.
However, according to the bill of sale agreement that you signed with the lender when applying for the loan, your lender is the temporal lawful owner of your vehicle and therefore has the right to repossess it should you default or be unable to make your repayments. The merits for taking this kind of loan is that you get access to a much bigger loan amount as compared to the day loans.
Basically, most lenders will advance you up to 75% of the value of your car which could be anywhere in the upwards of 50000 pounds. This is a far cry from pay day loans which have a maximum amount of 1500 pounds and cannot be used to finance a huge financial need. The drawback for this kind of loan is that you are bound to pay twice than the principal amount you took. The number one advantage is that your credit score does not come into play when applying for it.
This kind of loan allows people with bad credit get access to a loan provided that they have a guarantor who can guarantee their loan in the event that they fail to repay as initially agreed. However, the guarantor in question must be having a healthy credit history otherwise the financial institution in question will not be able to accept the said guarantor.
Still not sure what a logbook loans is? Find out here.
We live in a world that glorifies good credit history and shows contempt towards bad credit history. This is very much exemplified by the attitude that financial lenders have against people who are deemed to have a less than perfect credit score. The answer is always the same and many of such people have been forced to bore the brunt of rejections every now and then. In fact, it’s very difficult to secure a loan from high street financial banks with a poor credit rating. For long, this was the agreed concept and people with bad credit had no respite. They were forced to be on the receiving end of rejections every time they sought for credit from financial institutions and other kinds of lenders.
Came the introduction of bad credit loans and the ball game changed. At last, people with bad credit had a new lease of life. As the name implies, bad credit loans are those loan facilities designed for people with bad credit who have from time immemorial been denied access to credit from mainstream financial institutions. It is designed for people who have always been declined access to credit facilities because of a poor credit rating.
Bad credit loans offer individuals who had initially been unable to get access to bad credit some form of respite. The merit in this respect is that such people with bad credit and pressed for immediate financial needs can now get access to the much needed loan facilities. In a nutshell, the money advanced can be used for paying medical bills, consolidate existing debt or simply for any emergency that a person might be having. Secondly, if you have bad credit and are looking for a way in which you can redeem yourself and improve your credit rating, there is no better way than to take a bad credit loan. Timely payment of the same without defaults is a great way to demonstrate to existing credit bureau agencies that you are up to the task and can be relied upon to be responsible financially.
What are the different types of bad credit loans?
When you apply for bad credit loans, you can either go for secured or unsecured bad credit loans. Secured bad credit loans are the kind where your lender requires that you pledge any of kind of asset as collateral. The pledged asset acts as security in the unlikely event that you default in making your repayments.
Unsecured bad credit loan as the name suggests is one where your lender does not require or prevail upon you to pledge any asset as collateral. In this kind of loan, your financial lender does not have any claim to your assets even in the event that you fail to keep up with repayments. The only drawback is that unsecured loans tend to attract very high interests rates as compared to a secured bad credit loans.
To sum it up, in as much as bad credit loans have been a pleasure of sorts to people with a poor credit rating, the only downside is that it attracts very high interest rates as compared to ordinary loan.