You are considered a high-risk borrower by credit providers if you have poor credit. However, if you need to get a personal loan with bad credit, you can seek help from specialised lenders. These lenders provide the most effective solutions to lending problems by assessing an individual’s situation. Whether you are self-employed or a short-term contractor or have unorthodox borrowing needs and have a low credit score, you still have the chance of getting personal loans. Below are some important facts discussed which could be helpful if you are considering applying for personal loans.
How can a personal loan be used?
Personal loans with bad credit can be used in various ways like:
- Rental bonds: Moving houses involve a lot of costs even when a security deposit is not taken into consideration. So, you can apply for a personal loan to pay for the rental bonds.
- Car repairs: Owning a car comes with repair costs, and with personal loans, you can take care of some big repairs.
- Medical expenses: In urgent medical attention, getting a personal loan may help you cover the necessary costs of the treatment.
- Debt consolidation: With a personal loan, you can consolidate your debts within a single payment.
How can you get a personal loan with bad credit?
The reasons for bad credit and assessing the borrower’s application depend on various factors. For example, paid defaults are considered more positively than unpaid ones. Moreover, preference is given to borrowers who have lived in one home for several years and held a job for a long time. When a lender believes that a loan approval will involve huge risks, the borrower will likely incur high-interest rates.
What are the different types of bad credit personal loans?
If you want a personal loan with bad credit, there are some options you can consider. They are:
- Guarantor personal loans: Getting a guarantor personal loan means that you have a guarantor like a relative, spouse or parent who guarantees the loan repayment. Moreover, the guarantor needs to have a good credit score and own a property that could be used as security against the loan. When you have a guarantor, the chances of getting approval for the loan increase. Also, you can receive an even higher loan amount or a more competitive rate when you apply for this type of loan.
- Secured personal loans: Secured personal loans involve getting a loan with any asset like a car, home, or other valuables. When you use an asset for the loan amount, the risk to the lender gets reduced. And, if you are unable to make repayments on time, the lender can claim the asset as a form of compensation to cover the costs.
- Medium-term loans: Medium-term loans enable you to borrow an amount of up to $5000. You can also find lenders offering up to $10,000 for people with bad credit history. Also, remember that mid-term loans have a high-interest rate and can go up to 48 per cent per year.
- Short-term loans: Short-term loans involve borrowing small amounts and short repayment periods. You can get loans up to $2,000 for the term ranging from 16 days and 12 months. The lender usually focuses on the present financial circumstance of the borrower to assess the ability for loan payment within the given timeframe.
With the knowledge of bad credit and its implication for personal loans, you are now better equipped to make sound financial decisions in your future.