If you’re struggling with bad credit, you might not think loans are an option for you. Luckily, there are a variety of loans designed to fit every budget and financial situation. However, you have to tread carefully. Not all bad bad credit loans are a good option depending on your status and long-term goals.
A bad credit loan, also known as a personal loan for someone with poor credit, might be the right step to take on your debt payoff or savings journey. It can also be a slippery slope. If you’re worried about not being eligible for a loan from a big-name bank, don’t fret. Follow this guide to make sure you secure your bad credit loan the right way.
What Are Bad Credit Loans?
To start, let’s dive deeper into what a bad credit loan is. Simply put, it’s a specialised personal loan. A personal loan is a loan that can be used towards things like car payments, medical bills, credit card debts, or anything else you need.
What makes a bad credit loan different than a personal loan for someone with good credit? Because you have a lower credit score, banks see you as not being reliable or high risk. Your credit score is a way to check your lendability or the likelihood that you’ll pay your loan back in time. Since banks are in the business of making money, they’re more likely to lend to those who will pay them back what they’re owed promptly.
However, many bank and loan providers understand that people are more complex than their credit scores. There are a number of ways to secure a bad credit loan that might surprise you. As long as you’re careful with every step of this process, your credit score shouldn’t hold you back.
How to Get a Bad Credit Loan
There are a number of situations when you might decide to get a bad credit loan. If you find yourself unable to make your debt payments, needing a car repair, or in need of quick cash, you might consider a bad credit loan. If you’re in a situation where you don’t need money immediately, it’s best to wait until you’re able to increase your credit score to apply for a personal loan.
You can find a personal loan from a few different sources:
- Credit unions – Credit unions often offer options of lending for those with lower credit scores. Since these are smaller lenders, they have more flexibility.
- Co-sign with someone – Another option is to find a co-signer. Having a trusted family member co-sign with you is a great way to use someone else’s higher credit score for a lower interest rate.
- Home equity loan or refinancing – If you own your home, you might be eligible to take out a loan against your home’s equity. Because your home is secured, this is a great way to get a bad credit loan.
- Online lenders – Finally, finding online lenders is easier than ever in Australia. An online lender doesn’t have the same costs as an in-person lender, so it’s easier to find a loan that fits your needs no matter your credit score.
What to Consider About Bad Credit Loans?
These options above are all effective ways to get a personal loan no matter your credit rating. However, there are still a lot of things to consider before signing off on your new loan. Aside from steering clear of the payday loan trap, you also want to consider the long-term implications of this loan.
There are a lot of pros of getting a bad credit loan. You can get a loan quickly, and you might even have a lower interest rate compared to any current debts. If you commit to paying your loan on-time, you’ll even improve your credit score.
Yet, like with any loan, you need to pay close attention to what you’re agreeing to as well as your ability to repay everything on time. Some of the considerations for bad credit loans are:
- Higher interest rates – One of the biggest risks is accepting a credit rate that’s too high. Because you’re considered a risky borrower, that comes with a larger interest rate.
- Fees – A lot of personal loans come with fees and penalties. Always read the fine print carefully!
- Predatory lending – A lot of lenders take advantage of those in difficult situations with predatory lending practices. Always review the lender’s licensing and terms before agreeing. Better yet, review your prospective loan with a professional.
Start Your Debt Payoff Journey
If you’re struggling with debt or other last-minute expenses, you might be in need of a loan. Even if you don’t have a high credit rating, you still have a number of bad credit loan options that might suit your needs. However, consider each step in this process carefully. As long as you do your research and make a long-term plan, you’re in a good place to pay back your loan without stress.
Are you unsure what loan is right for you? Talk to the professionals at Debt Busters. We’re here to help! Our team offers personalised assistance no matter your financial situation. Let’s tackle your goals together! Contact us today to get started.