Credit scores count for everything in the world of personal finance. If your score is low, it’ll be difficult to acquire low rates on personal loans, and you may be refused outright.
It’s not all bad news, though. There are bad credit personal loans available, and you also have a few other options to make yourself a more viable borrower.
Okay, we know what you’re thinking, “It’s easier said than done”. And if you’re here looking for bad credit options, you’ve probably already checked your credit score and considered your options.
But making positive changes is easier than you might think. Here are a few ways to improve your score:
Lenders are more willing to take risks with smaller amounts. If you reduce the size of the loan, they should be a little more receptive. Of course, it means the loan might not be enough to satisfy your needs, so you’ll need to look for alternative funding options.
Ask friends and family members, sell unwanted assets and luxury goods, and tap into your savings account. It’s a nuisance, but it’s a viable option, and in the meantime, you can work on fixing your credit.
If personal loan lenders lack confidence in your financial ability, get a guarantor to stand in for you. A guarantor assumes responsibility for a debt if you fail to meet the repayment terms, thus providing the lender with some security.
Guarantors are often friends and family members. They can be anyone who knows you well and trusts you sufficiently. Needlessly to say, they must have a good credit score and solid financial standing.
It’s a big responsibility, so don’t make them feel obligated and be understanding if they refuse.
Secured loans are loans backed by valuable assets. A mortgage is a secured loan, as it is secured against the property. Car loans and other personal loans can also be secured.
Securing the loan provides some collateral and gives the lender a way to cover their funds if you fail to make the repayments. If you take out a secured loan against your car and stop making payments, for instance, the lender will repossess the car and sell it at auction to recover some or all the money.
Lenders are usually more willing to provide secured loans. You will also get a more favourable interest rate.
As the name suggests, bad credit loans are personal loans for borrowers with bad credit. They work a lot like the personal loans for which you may have been refused, but there are some key differences:
Bad credit loans are provided by specialist borrowers and while you don’t need a good credit score, you do need a stable income.
Need more help finding a suitable bad credit loan? Contact one of our lending specialists to ensure you understand the small print and get the best possible rates.
Payday loans, also known as “small-amount loans”, are an option if you don’t need a lot of money. But these loans have short repayment terms and very high-interest rates, so they shouldn’t be near the top of your list.
The No Interest Loan Scheme (NILS) is a better alternative if you need a small sum of money very quickly. NILS offers small personal loans to low-income borrowers who meet specific criteria. You must have an annual income under $70,000 or a household income of less than $100,000. It’s also available to borrowers who have experienced domestic violence in the last decade or have a Health Care Card/Pension Card.
Borrowers must use the money for a listed purpose (including beds, mattresses, household appliances, council rates, and certain home repairs) and show that they can repay the balance. There are no fees or interest charges.
Peer-to-peer lending platforms might be viable for some borrowers, but the rates/fees can be high, and many consumers prefer to work with major banks and financial institutions.
It has never been easier to obtain credit. Having a bad credit score can complicate matters somewhat, but as the above guide shows, there are still options out there for borrowers who don’t meet the minimum credit score requirements on traditional loans.
Contact one of the lending specialists at Ume Loans for more assistance. We can help bad credit borrowers secure the best personal loans for their needs.