Getting a loan isn’t always easy especially if you have a bad credit score, but if you desperately need a loan what are your options? The good news is you can still get a loan the bad news is you have more limited options and it will be a more difficult process.
But if you desperately need a loan and are suffering bad credit don’t despair right away because there are still options you can explore. Let’s look at what you can do if you are looking to apply for a loan in more detail.
Meet With An Advisor
If you have bad credit and need a loan then I would first recommend talking with your bank/ building society or a financial advice service. They’ll be better able to advise you on what your current credit score is and how it can be improved.
Even a poor credit score might not close off all your possible alternative loans. So, if you are lucky your credit score might not be as bad as you think and a financial advisor will likely be able to advise you on how to get it improved as well.
When you know what the issues behind your poor credit score are you’ll be better equipped to improve it. An advisor may also be able to recommend alternative loans for you to pursue as well, it might not be your first choice but it will at least give you a possible alternative.
Improving Your Credit Score
Improving your credit score is one of the best ways to improve your odds of getting a loan. However, the issue with this is solving the problems behind your poor credit rating will often take time. There are ways you can improve your credit score more quickly but this will usually take money and if you are looking for a loan then money likely isn’t available to clear off debts.
Improving your credit score is therefore only really a viable solution if you don’t need a loan right away. If you can wait a few months before applying you might be able to get your credit score up enough to open up more loan options.
Don’t Make Multiple Applications
One mistake many people make when applying for a loan (especially when they need one quickly) is using the “scattergun effect” where they apply to multiple different lenders. People who do this will often think this will increase the odds of at least one lenders accepting them.
But it won’t, every time you make an application it will be logged and the more applications you have, especially in a short space of time the less likely you are to be accepted by a lender. So, don’t rush into making application instead research potential lenders carefully and only apply to lenders who you believe you will have the best chance with.
But once you’ve got a lender in mind what type of loan should you apply for? Well let’s look at that in more detail, shall we?
Bad Credit Loans
Even with a bad credit score, you will usually have at least a few loan options although will usually all be bad credit loans. A bad credit loan is a loan that has been specially designed for people with a poor credit score. Many different lenders will offer bad credit loans but you should expect similar offerings from them.
A bad credit loan will have a higher rate of interest when compared to your average loan and lower limits. The great the risk the more you can expect to pay in interest and the more restrictions you will have upon you. They aren’t the desired loans many people will want but for many people with bad credit, they will be your only option.
Are Bad Credit Loans Worth It?
Bad credit loans aren’t going to be anyone’s ideal choice for a loan because of their higher levels of interest and restrictions but if you have poor credit they might be your only option. But are they worth accepting or is it better to try an improve your credit score and reapply later.
Reapplying later will usually always be the better option but again that simply won’t always be possible. If you are desperate for a loan then you will really have no choice but to go for a bad credit loan and work with the additional restrictions.
There are some positives to accepting a bad credit loan with a higher rate of interest as well. If you succeed in paying the loan back it could actually greatly improve your credit score, you’ll also be demonstrating that you are a trustworthy borrower at the same time.
By accepting a bad credit loan with a higher interest rate you’ll also be building a better discipline when it comes to budgeting as well. It will really give you the opportunity to show that you can be responsible and repair any damages to your financial reputation and credit score.
However, you will need to be 100% certain that you can handle the monthly payments. A bad credit loan can be a lot to take on so think carefully before accepting one if you are desperate for a loan you could easily end up rushing into a bad credit loan only to later realise you can’t handle the repayments.
Bad credit loans can be a practical solution for people with bad credit but you need to be sure you understand what you are taking on board. If you fall behind in your payments it can make your situation much worse so ensure you can handle your repayments.
Despite their name bad credits loans aren’t bad they are just aren’t ideal but when you are desperate for a loan and have bad credit they are really the option you have unless you can take some time to try an improve your credit score. So, don’t be put off applying for a bad credit loan if you need a loan quickly.