Bad credit personal loan – can you get approved?
If you’re looking to get a personal loan with bad credit, then this article is for you. We’ll go over whether or not you can get a personal loan with a bad credit rating, what causes a bad credit rating, and some tips to help you improve your financial situation and your chances of getting approved.
Can a broker help you get a personal loan with a bad credit rating?
First off, the answer is yes. A broker can help you get a personal loan with a bad credit rating, also referred to as bad credit loans.
However, that doesn’t mean it won’t be difficult and take some time to find the best option for you.
For bad credit personal loan applicants, most lenders will require that you pay back a higher amount (usually based on your income), and at higher interest rates, than someone who has excellent credit. And if they do give you the loan, they will likely require collateral or proof of income to get your loan approved.
So how do you know whether or not you have a bad credit history? Well first let me tell you what qualifies as “bad credit”:
- A bankruptcy on your record in the last three years
- An unpaid judgment against you
- Too many late payments on any debt, including credit cards and student loans
- An account that has been sent to collection
What causes a bad credit rating
There are many factors that can affect your credit score, including:
- Late payments. You might be surprised to learn that missing a payment by even just one day can lead to a lower credit score on your credit file. How much of an impact depends on how late you are, as well as how serious it is (a couple days vs. months).
- Defaulting on loans or credit cards. When someone defaults on their loan or credit card debt, this information goes into their report and stays there for seven years—even if they pay off the entire balance during that time period! If you have any outstanding debt from previous periods when you were earning less money, it’s important to try and pay it off now so as not to negatively affect future applications for loans or lines of credit.
- Bankruptcy filings. Filing for bankruptcy is unfortunately not uncommon among individuals who find themselves unable to keep up with their bills because of unexpected expenses or job loss; however, while they may provide some relief in terms of getting rid of at least some debt obligations temporarily (and sometimes permanently), they also bring negative consequences in terms of how creditors will view them going forward.
When you file for bankruptcy, a court-appointed trustee will review your finances and assets to determine if you qualify for protection under the law. If they do, this fact will be listed on your credit report as well as any other negative information (such as late payments or collections accounts) that’s currently affecting your score.
Tips for improving your chances of getting a personal loan with bad credit.
If you’re looking to apply for a personal loan in the future and you have a bad credit history, one of the easiest steps you can take is to pay all of your bills on time. Doing so will help raise your score over time, improve the outcome of any credit checks and increase your chances of approval.
Don’t open new credit accounts or rack up debt, that will actually hurt your chances of getting approved for other loans in the future.
If you have bad credit, there are other options. For example, some lenders will work with you if they see that your debt-to-income ratio is low and/or if you have a large amount of savings available that can be used as collateral for the loan.
It’s also a good idea to make sure you have a steady income and stable employment history. Your bad credit personal loan broker will want to look at your payslips and bank statements as evidence of these.
Questions our brokers are commonly asked:
What is a bad credit loan?
A bad credit loan is a personal loan that caters for those who have a poor credit history.
Can a broker get me a better loan deal than the bank?
While banks can offer personal loans, a finance broker can help you to access and compare loan options from multiple banks and lenders.
Learn the difference between broker vs bank, here.
What are the fees to consider when getting a bad credit personal loan?
There can be loan application fees, establishment fees, early repayment fees or ongoing fees. Some loans also have a break-cost fee or late payment fees.
Can I apply for a personal loan if I am on Centrelink, disability or pension payments?
Yes. While many lenders will only assess income from earnings and not benefits, we will do our best to help you find a loan that is suitable and affordable for your circumstances when assessing your loan application. Payday loans are not the only answer for customers who need access to finance and are receiving benefits.
How does a loan help to improve my credit rating?
If you pay off your loan on time and with no missed payments, this will help to improve your credit score.
What can I use a personal loan for?
A personal loan can be used to finance a holiday, a home renovation loan, emergency expenses, wedding finance, vehicle, boat, jetski, caravan, motorbike, educational expenses, vehicle repairs or even dental financing.
Is the consumer credit protection act relevant in this situation?
This federal legislation protects consumers from harm by creditors, banks and credit card companies. It means that the total cost of any loan or credit product must be shared with consumers, including how interest is calculated and any fees involved. Our team will always make sure you are fully informed throughout your loan application process.
When you’re trying to get a personal loan with bad credit, you may have some doubts. The best way to deal with these doubts is by speaking with an experienced and knowledgeable personal loan broker who will do their best to help you get the loan you need, but won’t put your credit rating at unnecessary risk.
Find out more about what finance brokers do, here.
Is a bad credit personal loan a secured loan or unsecured?
Unsecured personal loans don’t require collateral against the loan, which means there is no risk to your personal property. On the other hand, secured loans are secured against something you own like a car or house. There are pros and cons to each and your broker can help you find the best type of loan based on your personal financing needs.
Contact the team at FLOW Financial Services with your questions about bad credit personal loans!
