Don’t let a bad credit rating keep you from applying for finance. There are reputable lenders that will consider your loan application despite your bad credit.
There are loans which are especially designed for borrowers in your situation, but they come at a higher cost. Is there an effective solution?
Loans for people with a bad credit history
There are always possibilities for getting reasonable finance to those who are ready to put in extra effort. As long as you have a clear idea of what you have to do and what kinds of mistakes you need to avoid, you will certainly achieve the desired result.
Here you will find information and advice which will help you to boost your chances of getting finance.
Eligibility requirements of lenders vary
You need to understand that neither the credit reporting bodies nor the micro lenders in Australia define credit history as good or bad. In order to assess your eligibility as a loan applicant, the lender will check your credit file. Each lender has their own criteria so you may be able to qualify even if your credit file is not completely blemish-free.
You should definitely go over your credit file before you make an application for a loan. You can obtain it once every year for free. You should watch out for errors. If you find any, you should request to have them fixed right away.
Since the eligibility requirements of lenders vary, you will benefit from applying to several different ones at the same time. You just have to do it within a short period of time, preferably within a week or two at the most, so that your credit history will not suffer a considerable negative impact.
It is important that you apply only to licensed lenders working under the National Consumer Credit Protection Act and following a responsible lending policy. You must stay away from the tempting offers of loan sharks.
These lenders provide credit easily and quickly, but they charge interest and fees which are extremely high and almost impossible to pay.
If you have very bad credit history, you should also check out the alternative options for borrowing.
Credit Union Loans
Traditionally, credit unions have been more flexible compared to banks. They are more likely to look into your individual circumstances and to understand your situation in addition to assessing the numbers present on your payslips and the information on your credit file. That is why you should consider applying for a loan from one of these institutions.
Peer to peer (P2P) lending platforms
The peer to peer lending platforms are becoming ever more popular. You can visit such a platform online and borrow money from a private person. When you deal with individual lenders, there are no strictly defined eligibility criteria. You can get a loan more easily and arrange a more flexible repayment term. You will still have to pay interest and fees so you need to plan the repayment of the loan carefully.
Loans from family or friends
It is much more comfortable to borrow money from a person who is close to you than from a stranger that you meet on a peer to peer lending platform. Besides, a family member or a friend is more likely to understand your situation and to help you out. The fact that you borrow money from a close person does not mean that you should not adhere to the core principles of this financial practice. You should prepare a short and clear written agreement so that both of you can sign it.
It is best to get the money via a bank account transfer.
Another way in which a family member or a friend can help you with obtaining finance is to become your co-signer. When you apply for a loan together with a person who has good credit history and stable income, your chances of approval will be much higher because you will be jointly responsible for the repayment of the loan. With the help of a co-signer, you can even secure a loan with lower interest rate and more flexible repayment structure.
Loans backed with security
With a secured loan, you need to place an asset as security. In this way, if you default on the loan, the lender will have the right to take over the asset to cover their losses. Since the risk for the lender is lower, you will stand higher chances of approval even with bad credit. You may even be able to secure a lower interest rate. This option is risky, but it can be quite helpful as long as you are able to pay back the loan without any hitches.
A word of advice
You must assess the affordability of the loan which you plan to take out. You have to ensure that you will be able to make the regular payments given your current income and spending. If you cannot fit the repayment into your budget, you should look for another borrowing option.
You need to shield yourself from getting into debt in the most effective way possible.