Are Bad Credit Loans the Answer?

There is no such thing as a credit blacklist, when it comes to applying for a loan. A potential lender considers the individual circumstances of each application. However, having a poor credit score will not help, if you are looking to borrow money. 

You do have options available, to get more money if you have bad credit. You may still be able to borrow money, as some lenders do provide loans to people who have problems with their credit rating. 

Why your credit score is not good 

Before you apply for a loan of any sort, you need to check your credit score and understand what it means. There can be several reasons for a credit score not being good. These reasons include:

  • Falling behind with credit repayments. 
  • Failing to pay bills on time.
  • Being declared bankrupt.
  • Never having obtained credit previously and therefore having no repayment history.  

It’s also possible for mistakes to appear on a credit report. This type of mistake can result in an incorrect credit rating. For this reason, it’s important to question any potential errors on your credit report. 

Once you understand your credit situation, you need to decide whether to apply for a loan which is specifically designed for people who have poor credit. 

Explaination of a bad credit loan 

This type of loan is not provided by every lender. It’s a loan that is designed for people who may not be able to secure other forms of credit. These loans normally have higher interest rates attached to them. This means that they can be expensive to obtain. There are several pros and cons that you need to be aware of, before you apply for this type of loan. 

The pros and cons of bad credit loans 

If you need money, to help with an urgent expense, there are some pros of considering a loan for people with poor credit. 

  • If your credit score is not good, you are more likely to be accepted for this type of loan than for a normal loan.  
  • If you keep up with repayments on any loan that you receive, you can improve your credit rating over time. 
  • The process of making a decision on this type of loan is usually quick. 

Despite these positive aspects, you need to think carefully before applying for this type of credit. This is due to the cons which also exist. 

  • The interest rates attached to this type of loan are higher than those attached to regular loans.
  • As not all lenders provide this type of borrowing, the choice of lender is limited.  
  • These loans are not a good solution for anyone who needs to borrow in the long term. 

Having weighed up the positives and negatives of this type of borrowing, you may decide that you need to think about other options. 

Other options to consider 

Depending on why you need the money, there are several alternatives to borrowing that may provide a solution. 

Better money management 

If you are not in need of a loan for an emergency situation, but you simply want to make life easier, you should concentrate on improving your finances. This is a better long term solution than borrowing, especially if you already have problems with credit. 

It’s essential that you learn how to manage your finances. You should start by creating a monthly budget which needs to include a list of your income and all of your expenditure. Remember to include items such as meals out and even that regular coffee you have on your way to work. 

Once you have created a budget, you need to critically analyze your spending and identify any savings you can make. The money that you save should be used to pay off your debt as quickly as possible. You also need to put some money into a savings account. It’s recommended that you save at least 20% of your income. However, any amount of saving is positive. Having money set aside helps you to deal with emergencies without needing to borrow. 

Earning more money 

An obvious way to increase the amount of income that you have is to earn more. You can see if there is any opportunity to work extra hours for your current employer. Alternatively, you may want to look for a job that pays more. 

You could also consider looking for a side hustle. Identify a skill that you have and use it to help you earn more money outside of your regular job. 

Selling items that are not being used 

Most people have items around their home that they do not use anymore. If this applies to you, it’s possible that you can make some money from these items. 

In order to do this, you need to have a clear out in your home. Label some boxes before you start, so you can sort items into what has to be thrown away, what can be recycled and what you can sell.

Once you have sorted out the objects that you can make money from, you need to sell them. There are several ways that you can do this, including having a yard sale and selling online, using a site like eBay. 

In summary 

There are loans which are intended to be awarded to people who have issues with credit. However, there is no guarantee that you will be accepted, if you apply for one of these loans. You also need to think carefully about the fact that these loans can be expensive and your choice of lender is likely to be limited. 

Depending on why and when you need the money, you may prefer to start managing your money better, in order to improve your financial situation. You could also try to earn more money and sell items of value that you no longer use.  The decision about how to get the money you need is a personal one. However, you should make sure to consider all of your options before you decide. 

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