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Getting a Personal Loan with Bad Credit
June 2, 2016●
5 minute read●
Life is full of unexpected ups and downs. When you’re on one of those downward trends and you need cash fast, you may be wondering if you can get a personal loan with bad credit?
To deal with life’s little surprises people are increasingly turning to instant cash loans. These are smaller loans that can often be approved quickly. The process is usually less rigorous than those of big banks.
Many people find these unsecured loans ideal if they are just starting out and have few assets or next to no credit history. They can also be excellent for people who have bad credit, or whose finances have taken a beating over the years.
Many people with bad credit can find it impossible to get a loan from a bank. So, a personal loan with bad credit offers another way to get access to money. They may be simpler to have approved than you realise, especially if it is not a huge amount you’re seeking.
How do you get a bad credit history?
A bad credit score can happen through missed payments for utilities. They can happen through defaulting on repayments on any fast cash loans. They can come from multiple credit applications in a short time. Even if you caught up with those missed repayments or were late paying in the first place, it could still be on your credit history for five years after the fact. The fact is many factors, even those you might not think about, can play a role in affecting your credit rating.
Bad credit can happen accidentally if you simply forget a bill, or if you relied on another person, such as a flat mate, to pay it and they didn’t.
However, life happens and sometimes circumstances seem to conspire against you. Unexpected bills turn up, accidents happen or illness strikes, preventing you from earning your usual paycheck. If you don’t pay what you owe when the payment is due, your credit history will suffer. It is a good idea to check your history, so you know what you are up against.
Many people get stuck with credit card loans that have such high-interest rates they can never afford to pay it all back. All they can manage is the interest on the loan, which doesn’t pay down the principle. This means they can be paying interest for years on a loan that should have been done and finished with a long time ago.
Why do you need to improve your credit history?
Having a bad credit history can really impact your life. You may find it difficult to purchase a car so you can get to work. It may be impossible to get a home loan, and it may be difficult to even rent a home or do many of the things we take for granted and are essential parts of our culture – even something as simple as a monthly data plan for your phone.
If you do manage to get finance, it will usually be at a much higher interest rate and probably include lenders’ insurance as the financial institution will want to be protected against possible loss. This does not mean you are automatically ineligible for a personal loan with bad credit, but you should take it into account.
How to improve your credit history?
If you have a bad credit history, even taking out a small, unsecured loan can improve it. This is given that you pay it back regularly and on time without any defaults. Doing so will improve how you are seen in the future by other potential lenders. This might also allow you to build up towards approval for a larger loan such as a mortgage to buy a house.
If you have many debts, it is essential to pay them off as soon as possible. This can be made easier by rolling all your debts into one by getting a debt consolidation loan at a lower interest rate. However, it is not always the best thing to do. It is important to consult with a financial advisor to get the best advice for your situation.
The best way to improve your credit history is to continue making regular payments of your debts. Banks will then see that you can be relied on to make consistent payments.
Don’t apply for new credit until you truly need it. Applying often and being rejected each time will make you credit history appear really bad. It is better to wait for as long as possible between each application or wait until you can be surer of acceptance.
Once you have started to make consistent payments off those debts, ideally wait for a year or more before applying for credit. When a lender sees you have made consistent payments for multiple years, they will deem you more creditworthy.
What do you need to know about getting a personal loan with bad credit?
Making sure you meet the requirements before applying for a loan will give you a better chance of success.
Before you get a loan for car or any other expense, work out whether you can repay it. And furthermore, whether you can repay it without impacting your lifestyle severely. Many websites offer online calculators to help you work out the repayments on a weekly, fortnightly or monthly basis.
You need to put in the numbers and subtract the repayments from your normal wage, then work out if you have enough left over to pay other expenses and put food on the table. If in doubt, don’t apply for the loan as you’ll likely be refused and this will impact on your history.
Work out precisely what you are spending money on by keeping a detailed home budget – this will help you spot ways to reduce your expenditure and cut back on things you maybe weren’t aware you were spending so much on. Any extra cash you save can be put towards paying off quick loans, reducing other debts and having money left over so you can still have a great life.
Do you need a personal loan with bad credit now?
If you’re looking for a personal loan now, even with poor credit, you may be eligible through Jacaranda Finance. Our application process is 100% online. If you apply during AEST business hours we could even have an outcome on your application in as little as 60 minutes.
Simply scroll up to use our handy online calculator to see what your weekly, fortnightly, or monthly repayments could look like.
Written by Jacaranda Team