Looking for a second chance to get your finances sorted but are struggling to find a lender? It might be time to look at getting a bad credit loan so that you can get yourself back on track.
Bad credit loans can be great for getting a car financed, consolidating other sources of debt or paying for any surprise expenses. But you might be wondering if a bad credit loan is right for your needs.
As always, it’s best to do your research. Make sure that you chose the best loan for you and that you have a plan to pay it off.
If traditional lenders like banks are refusing your applications, a bad credit loan might be right for you. Luckily, there are a lot of different lenders out there who can give you a second chance at your finances.
As the name suggests, bad credit lenders specialise in lending to people with bad credit scores. They often pay less attention to your credit score and focus more on understanding your current situation.
Applying for a loan should always be considered carefully. When taking out any new line of credit, you are putting yourself in debt so it’s important to make sure you never treat it as a trivial thing. A common way to think about it is to work out if it is for a need or a want.
Needs are things like your rent, your bills or your groceries. You need to be able to eat, have a roof over your head and have electricity in your home. Wants are things that aren’t necessary like a Netflix subscription, eating at a restaurant or buying alcohol. Some things can fall into both categories. While you might need a car to get to work, you might only want to upgrade your current model.
Make sure that you aren’t putting yourself in a risky position just for a want as the outcome could make your financial future a lot harder.
Before anything else, it’s important to ask yourself if a bad credit loan is your only option.
There re a lot of different ways to apply for credit and they all work for different needs. Many people look for bad credit loans because they’ve been declined by a bank or another traditional lender. But it might be worth applying to a traditional lender first as they can have lower interest rates or fees. Have a look around and check your options before committing to any type of loan.
Regardless of whether you decide to take out a bad credit loan or not, you must first make sure that you’re eligible. If you aren’t eligible for a loan, then it doesn’t matter if it’s right for you. To be eligible for a bad credit loan, it can be helpful to make sure that you are:
Different lenders will have different criteria but if you can prove these then you are well on your way to being eligible for a loan.
If you know that you’re eligible for a bad credit loan, the next step is to make sure that you will be able to pay it back.
Sometimes all you need is time to save up for something you need but life can be unpredictable and you don’t always get the time required. If you know that you’ll be able to pay back the money then a bad credit loan can give you the boost you need to afford what you need more quickly.
If you aren’t sure but need the money, have a look at your finances to work out if you’ll be able to make your repayments. The last thing you want to do is put yourself in a position to miss payments or default on a loan.
Lending money is always a risk. One of the main ways that lenders assess that risk is by looking at your credit score. If you have bad credit, then anyone lending to you feels like they are taking a bigger risk with their investment than if you had good credit. To offset their risk, many bad credit lenders will charge high fees or add high er interest rates to the loan.
If you aren’t happy paying these, then a bad credit loan may not be for you. There are many different ways to open a credit account and you may be able to apply for one that doesn’t charge extra for convenience.
Sometimes you just need a little extra boost to let you pull yourself out of debt. Once you’ve gotten yourself steadied or consolidated your debt, it can be easier to focus on paying it back.
But using debt to get out of debt can be like using fire to put out a fire. If it’s not done properly, you can end up in a far worse position than before. It could lead to defaulting or even legal claims if you’ve used collateral.
Before applying for another line of credit, make sure that you’ve considered your position and asked yourself if more debt will help you or hinder you. If it’s helpful, create a budget to track your cash flow and make a plan so that you know how much you can afford to pay back each month.
Bad credit loans can be quick and easy, but they come with risks so it’s important to make sure that you’ve properly considered your position before committing to one. Doing your research and going in with a plan ensures that you can use it to give yourself a second chance at financial freedom
Dan, a former Australian jetski champion is passionate about helping various organisations and has held various volunteer and executive positions with several non profit organisations in Australia.