If you’ve got bad credit, you probably already know how it can impact your life. From utility connections to mortgages, bad credit can haunt you for years.
This is especially true if you’re hoping to take out a loan. Sometimes, bad things happen. The car breaks down, you lose your job, or you just have to take time off work when the kids are sick.
These types of situations are easy to tackle if you have savings. But if you’re living payday to payday like an increasing number of Kiwis, they can be financially devastating.
Luckily, there are loans for people with bad credit. So when disaster strikes, you can get the help you need to fix the situation and move on with your life.
Bad credit can make it more difficult for you to get a loan. Keep reading to find out what you need to know about loans for people with bad credit.
Read on for everything you need to know about these types of loans.
Loans for People With Bad Credit- Are They For You?
Bad credit can prevent you from doing basic things like purchasing a car, applying to rent a house, or even getting your electricity connected. It can even feel terrifying to know that if an emergency arises, your bad credit can make it impossible for you to get a loan from most financial institutions.
But there are loans for people with bad credit, and if you need money in a hurry, they could be the best option for you. Here’s what you need to know:
You Need to Know Your Score
Before you assume your credit is terrible, it’s best to check your credit score. You can request your credit report from Centrix, Equifax, and Dun & Bradstreet. It’s free to apply for your credit report, although if you need it in a hurry you’ll need to pay a fee.
If you notice any errors in your report, you should get them sorted out immediately. You may have higher chances of getting a loan than you might think.
You’re Seen as “High-Risk”
When it comes to money, we’re treated according to our past behavior. That means that forgetting to pay a bill or being sent to Baycorp can impact your ability to borrow money for years.
Credit unions, major banks, and other lending institutions consider people with bad credit to be high-risk customers. Because these lenders have strict standards, they must check your credit score.
If lenders don’t think you’re going to repay a loan in full and on time, they’ll refuse to lend you any money. It’s easy to see why- if you heard that a neighbor was continually borrowing money off your friends and didn’t pay them back, you’d be less likely to lend money to them, right?
Unfortunately, it can be easy to end up with a poor credit score, even if you usually pay your debts and bills. Simply moving address and forgetting to update your information, or assuming a bill was paid in full when you still have a balance can turn into a long, and expensive mistake.
You Can Still Borrow
The good news? While you may not be able to borrow from a bank, there are still loans for people with bad credit.
You can often borrow up to $500 and be approved within just one hour. However, you can expect to pay higher interest, since you’re still considered high-risk. Because these loans are seen as a short-term, emergency solutions, the idea is to get them paid off as quickly as you can.
You can expect to pay an establishment fee, and an account fee if it’s your first time borrowing. You’ll also usually pay 1% interest per day. This can seem high, at 365% PA, but it’s important to remember that these loans are designed to get you through a short-term situation.
You Should be Smart
Since loans for people with bad credit have higher interest rates, it’s in your best interest to pay them off quick. Here are some tips:
Borrow the Minimum
Even if you only need $300 for car repairs, it can be tempting to borrow $400 or $500 to make things a little less tight for the rest of the month. But the more you borrow, the longer it will take to pay back, and the more interest you’ll end up paying.
Get More Money in the Door
If you’ve suddenly had an emergency occur and you need money quick, a payday or short-term loan can help you get it sorted out immediately. But you should aim to get as much money in the door as you can to pay off that loan quickly.
Pick up an extra shift at work. List those old clothes or electronics on TradeMe. Skip your weekly night out or takeaway. Any extra money you can find can go straight onto your loan, so you can save money on the interest.
Understand the Terms and Conditions
Before you sign on the dotted line, it’s crucial that you understand your rights and obligations. That means reading the terms and conditions carefully. You should also ask a company representative to explain any points you don’t quite understand.
A good loan company will be committed to your financial health. They’ll want you to be fully aware of how the process works and will be more than happy to explain anything that seems unclear.
You should know:
- How much interest you’re paying
- Whether this interest is compounding
- When you need to pay the loan back
- The amount you’ll need to pay in administration fees
- How much you need to pay for each repayment
- The consequences of any missed payments
- How you can make your payments (e.g. direct debit, cheque)
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Need a Loan?
If you’re in a tricky financial situation, you can still take advantage of loans for people with bad credit. These can help you get through an emergency, or help you sleep better at night after a stressful situation.
As long as you borrow responsibly and stick to your repayment terms, a short-term or payday loan can be the right choice for you.
If you need a loan, apply online now, or get in touch with any questions.