A lot of factors can lead to bad credit. With stagnant wages, rising interest rate and the escalating cost of living a lot of people face challenges paying out their current loan instalments and credit bills. In wake of cash shortages, many resorts to payday loans or additional short term loans from online lenders. However, using additional loans as a definitive cash gap alternative is one thing and using these high-cost loans to sustain your everyday expenses is another.
A bad credit loan thus needs to be well planned before you avail one. Different people need loans for different purposes. But it is important to not opt for very long bad credit loans. You must opt for small plans as 3 months, 6 months or 12-month loans for bad credit.
Before you apply for your loan, know a dozen of following points:
1. What is your current credit situation?
Whether you need a loan for an emergency medical bill or nature’s guile, it is important to assess your credit situation well before you apply for a loan. You must pull out your free credit report and make an account of your income to debt ratio.
2. Why you need?
Bad credit loans come at additional cost. You must apply for a loan only when you have valid reasons for the same. You must ask yourself several times and find a definitive answer to why you need an additional loan. Is there any alternative funding resource? Finding reasons also helps you better channelize the funds and ensure efficient use of the loan amount.
3. How much you want?
It is important to assess the amount you need to borrow. It is important to ensure that you borrow exactly according to your cash lapses. Make sure you do not borrow more than what you require.
4. For how long?
The loan duration is another important factor. You should plan your loans and stay away from rolling over later on. For, refinancing a bad credit loan can entail additional charges. Make sure you borrow for short term loans up to 12 months. It is easier to manage small loans after all.
5. Where to apply?
Searching a lender with low loan eligibility and poor history could be a hard task. To avoid the hassle of searching a lender directly you can contact a loan broker online. They can help you find affordable deals available online.
6. Can you afford the loan?
Before choosing any loan deal, make sure you could afford the monthly instalment. A lot of borrowers prefer to choose a weekly instalment loan; you must share your apprehensions clearly with the loan broker.
7. Is there a repayment plan?
Bad credit loans shall never be defaulted or it will worsen your credit situation. Always draft a repayment plan before you avail the loan.
8. Do you have loan security to offer?
Secured loans entail a cheaper interest rate as compared to unsecured loans. If you have a loan guarantor or collateral, you can avail a low rate loan more swiftly.
9. What is your back up?
To ensure successful loan closure, you must have a repayment back up.
10. Can you prepay?
Always ask the lender if you can prepay the loan. Generally, bad credit loans do not have prepayment charges.
11. Are there hidden charges involved?
Ask as many questions as you want. Many times there are hidden charges involved and you must clearly query about charges and fees involved.
12. What if you fail to repay?
While you are working to pay out a loan on time, it is recommended to ask the lender what is the policy in case of nonpayment. You must know about the late payment charges and other issues involved.