Bad credit is a result of being unable to make payments on credit card agreements in the past, and it means that you are no longer eligible for new credit. This can be very disruptive and has several side-effects. For instance, having a bad credit score can make it harder to rent a house or an apartment. You may also be charged high interest rates on your loans and credit cards.
If you have a bad credit score, then there are two options to consider. The first is credit repair. The second is applying for a personal loan with bad credit.
Let’s take a look at both of these options and what you need to do for each:
Applying for a Personal Loan with Bad Credit
If you have a bad credit score, then you can always approach a lender that provides personal loans with bad credit. There are several types of personal loans with bad credit. They are classified according to the additional requirements that come with the loan. For instance, some personal loans will need to be secured through collateral. If you are willing to pledge your car, home, or any other valuable asset that you own as collateral, then this is a great option for you. Since these loans are secured, you can also get a high loan amount with a low-interest rate.
You can also apply for a Payday loan. These are short-term loans that do not require a credit check. There are several lenders that offer Payday loans in Australia. These include:
- Sunshine Loans Short-term Offer
- Wallet Wizards
- Cash Converters Personal Loans
- Nimble Short-Term Loans
- Ferratum Cash Loans
- Fair Go Finance Small Loan
These lenders can extend loan amounts of up to $2000. The loan terms vary according to the lender. For instance, Nimble offers a loan term that is 62 days but can go up to a year for a short-term loan. Wallet Wizard, on the other hand, offers a loan term that can go up to 2 years. Lenders like Cash Converters also offer loans that can be repaid within a year.
You can check the extra costs and the repayment amount for these loans. Most lenders charge an establishment fee that is 20 percent of the loan amount. They also charge a monthly fee that is 4 percent of the loan amount.
Besides secured personal loans and payday loans, you can also apply for a personal loan that requires a guarantee from a third party. There is also the option of getting an unsecured personal loan, but the interest rates for these loans are extremely high. This is to make up for the additional risk that a lender is exposed to.
Repairing Your Credit Score
The second option for people with bad credit is repairing their credit score. Repairing your credit score is a long and tough process. However, if you keep at it, then it is also possible to bring your credit rating back in good standings. If you are looking to improve your credit rating, then here’s what you need to do:
Start Making Payments on a Timely Basis
If you are serious about credit repair, then paying your bills on time will go a long way. This will reassure your lenders that you are capable of managing your finances in an effective manner. Your payment history makes up for 35 percent of your credit score. Thus, an improvement in your payment history will automatically influence your credit score in a positive way.
Get an Individual Account
Credit scores get linked if you have a joint account. If your credit rating is linked to a member of your family, then any misdemeanors on their part will also influence your credit history. You can consider getting an individual account so that your credit rating remains unaffected by another person’s financial activities.
Look for Errors in Your Credit Profile
In some cases, you can also have a bad credit score because of reporting errors in your credit profile. These errors usually occur due to certain discrepancies in the amount owed and the date of payment. They may also result due to errors in the way certain items (a lien or a bankruptcy) are reported. If you find any such errors, then you can file a legal dispute to get them removed. This can restore your credit rating and bring it back in good standing.
Limit Your Credit Utilization Ratio
Your credit utilization ratio is the ratio that compares your outstanding payment with your credit card limit. It tells your creditors how much of your current credit limit is in use. Having a low credit utilization ratio is a good sign for creditors looking to extend you a loan. It tells them that you will be able to make payments on any future loans. Most creditors will prefer a credit utilization of less than 50 percent. Anything higher than this will make you a risky prospect. Your credit utilization ratio also makes up for 30 percent of your credit score. Therefore, keeping a check on the amount of credit you use can help you repair your credit rating.
To Sum It Up
Having a bad credit score is not the end of the world. You can try and get your credit rating repaired, or you can apply for a personal loan with bad credit. Of course, compared to credit repair, applying for a personal loan is the easier option. However, make sure to carefully examine the extra costs attached to these personal loans. You also need to make sure that you will be able to make payments on these loans.
If you require a personal loan right away, then we suggest you get in touch with the team at Bad Credit Personal Loans. They offer a variety of credit solutions for people with bad credit and can help you get a personal loan with payment terms that suit your budget. Good luck!