People apply for loans or financing for different reasons.
Some people need the money to pay their bills or tuition fees. Some borrowers need the extra cash for a family vacation or home renovation. Sometimes, quick financial assistance is needed when emergencies arise. Personal loans can be used for many purposes and these loans can either be secured or unsecured.
Whatever your reason is for taking out a personal loan, it’s important to be aware of your credit status before submitting your application.
Do you have an impressive credit rating? Or do you have a poor credit score?
Needless to say, having a high credit rating is advantageous because it ensures quick approval of your loan and it gives you access to the best loan deals in the market.
For borrowers with poor credit, a bad credit personal loan is a viable option. However, the rate of interest for bad credit loans is expected to be higher than regular loans because there is a greater risk involved.
Without good credit history to back you up, a lender will automatically consider you as a “high risk customer” which means the possibility of default is much higher. To make up for the risk, most bad credit loan lenders charge a higher rate of interest on this type of financing.
Should you get a bad credit personal loan? The answer will depend on the situation you’re in. However, before making a decision, consider the following pointers:
Have you considered other possible ways for you to produce the cash you need? For instance, you might be able to borrow cash from your friends or relatives until you’ve gathered enough fund to use for the emergency. Do you have a property which you can sell? Before applying for a bad credit personal loan, think about other options which can save you from the high interest rates.
Check credit report.
Even if you already know that you have imperfect credit, it is still a good idea to order a copy of your report from the three major credit bureaus so you can check its accuracy. If there are errors in your report, having them corrected can instantly increase your score by a number of points. Even the slightest increase in your score can make a big difference in the interest rate you will get.
Watch out for scams and rip-offs.
Loan scams abound in the market. Unscrupulous lending companies may trick borrowers to sign up for a bad credit loan by offering quick approval and incredibly low rates. If you’re not careful, you could be victimized by their deceiving tactics. Therefore, it’s important not just to compare the rates and fees, but to check the background and reputation of the lending company as well.