Christmas allows us to bond with our family and friends. But, this season also involves some gifting to your loved ones. Unfortunately, while it’s always best to start saving early, not everyone has that financial ability.
So what happens if you need to gift your loved one, but your finances don’t allow it? That’s where bad credit loans come in. Continue reading to learn more about these loans and make an informed decision.
What Are Bad Credit Loans?
These are loans designed for individuals with a bad credit history or no credit history. Note that your credit record influences whether or not you get your loan application approved.
Most lenders favor borrowers with a great credit history. As such, it makes those with a poor credit record struggle to get loan approval. Thankfully, with the introduction of bad credit loans, even borrowers with a not-so-good credit history can get some financial assistance.
However, the terms for these loans are a bit strict to protect the lender should the borrower default. Most of them feature a high-interest rate compared to other loans. And, lenders generally give lower loan amounts.
But since they don’t decide your eligibility based on a credit check, these loans can come in handy. Instead, lenders look at a borrower’s personal situation when deciding whether or not to lend them. What’s important is that you prove that you can repay the money you’re borrowing as your current circumstances allow you to.
What Loans Can I Get with a Bad Credit?
Even if your credit score is poor, you can still get favorable loans to help you get out of your financial woes. These include guarantor loans, specialist loans to those with bad credit, etc. But many lenders offer car loans, personal loans, payday loans, and non-guarantor loans for those with bad credit.
The amount you receive varies depending on your lender and eligibility. But generally, expect some decent amount. Also, note that the repayment term is usually between 3-60 months. Thus, you can divide your installments to suit what you can afford.
When Should I Consider a Bad Credit Loan?
If you need to borrow money and think that you may not qualify for a mainstream loan, a bad credit loan might be a suitable option. But, it’s only given to those who are 18 years and above, have an active account and can prove that they can repay the loan.
But, more other things are considered when deciding your eligibility. When applying for a bad credit loan, please be certain that you can repay the money. Defaulting can make your credit record worse.
If you are approved for this loan and make your payments on time, your credit score can dramatically improve. Eventually, you will qualify for better loan products.
What Is the Interest Rate?
Unfortunately, even with bad credit loans, lenders still look at your credit history when deciding the interest rate to charge you. Bear in mind that it may be different than the rate banks and building societies advertise.
Generally, expect to pay a higher interest rate compared to mainstream loans. While most people are offered the ‘representative’ APR, some people will be charged a high-interest rate. And those with extremely bad credit history may be rejected.
Usually, borrowers find out the interest rate they’ll be offered once they’ve applied for the loan. But bear in mind that making too many loan applications can damage your reputation. Banks usually don’t love borrowers that have received several rejections.
What to Do If Your Application Is Rejected
If your loan application has been denied, please don’t rush to apply for another loan. Sure, Christmas may be fast approaching, and you need money to gift your loved one, but bear in mind that all loan applications you make appear on your credit record.
Making several applications within a short time sends a message that you’re desperate for money, which puts lenders off from lending you. The best thing is to find out from a lender why they declined your application. This may help you know what to avoid when making future applications. Also, use this time to build your credit record as well.
You can also consider other alternatives to bad credit loans like a credit building credit card. This is also suitable for individuals with a bad credit history. Again, even though your loan allows you to borrow a large amount, we recommend applying for a smaller amount to increase your chances of being accepted.
Bad credit loans allow you to borrow money even with a poor credit score. Therefore, they can come in handy when you need to buy a special Christmas gift for your loved ones.
Experts advise that you take a loan if your credit score is poor as it will help you improve it and secure your financial future. Since several lenders offer these loans, we advise you to shop around to get the best interest rate and payment terms.