Are you in need of funds? Is bad credit preventing you from securing the cash you need to meet your financial obligations, or to deal with an unexpected emergency?
Having a poor credit score can make it difficult to secure a loan – but it’s not impossible.
Many lenders offer loans for people with bad credit, that is, with a credit score of less than 500. And while these loans come with several key advantages, there are some drawbacks worth considering, too.
How to get a loan with bad credit
If you need to take out a loan – whether that be a home loan, car loan, or personal loan – but you have bad credit, you do have options. The best thing to do is to seek out a lender that offers no credit or bad credit loans. These types of loans are open to any- and everyone, regardless of their credit history.
Let’s take a look at the pros and cons of these types of loans.
The pros of loans for people with bad credit
Let’s start with the good. Here are some of the advantages of no credit loans.
- Lenders do not take credit history into account
This is the number one advantage of no credit loans – when examining a loan application, the lender does not take credit history into account. This is quite different from conventional loans, in which your credit score plays a significant role in the approval process.
- The approval process is usually quick
Because lenders streamline the application and eligibility criteria for bad credit loans, the approval process is much faster. The paperwork required is usually little more than an up-to-date bank statement, and application forms often take less than a couple of minutes to complete.
What’s more, the approval rate is typically much higher – up to 80 or 90 per cent for some lenders.
- Bad credit loans can help you improve your credit score
Perhaps you went through a financial rough patch in the past, and this had a detrimental impact on your credit score. You are now financially responsible but still can’t get approval for a conventional loan. Taking out a bad credit loan – and making your repayments on time – can give your credit score a much-needed boost.
The cons of loans for people with bad credit
Now, let’s take a look at some of the drawbacks of no credit loans.
- Bad credit loans guarantee higher interest rates
Typically, if you get a loan with bad credit, you will pay higher interest rates. This is because, from the lender’s perspective, the agreement is high-risk as a borrower with poor or no credit is more likely to default on the loan.
- Watch out for dodgy lenders
Dodgy lenders often target those with bad credit looking to secure funds. Keep an eye out for these kinds of untrustworthy lenders, as you may end up in all kinds of trouble.
Is a bad credit loan right for me?
Only you can answer that question.
If you have weighed up the pros and cons, you should have a clear idea of whether or not a bad credit loan is the right solution. Just remember to only work with reputable lenders with a proven track record.