Bad credit. It can happen to the best of us. While day to day it may be easy to ignore, it can really get in the way if you want to pursue a loan. Found your dream home? Ideal car or even want to plan a holiday and need extra cash? Sadly, with bad credit, your ability to borrow is severely impacted. As banks are risk-averse, should you have a low credit score, they are likely to reject your application outright. The very act of applying for a loan lowers your credit rating further. Meaning you don’t want to waste an application – what you need is bank loan alternatives with expert lenders.
What Is Bad Credit?
Bad credit is a term used to refer to your financial rating. Bad credit is a result of poor credit history. Your credit history is impacted by any transactions you engage in whereby you owe or borrowed money for a service, goods or funds provided. Such as:
- Utility accounts. Water/electricity, phone bills etc.
- Credit cards
- Loans, this can be bank loans or payday loans.
- Pay-later schemes such as Zippay and Afterpay
- Rent/Mortage repayments
If you fail to pay bills on time or make minimum repayments on loans, your credit rating goes down. Owing significant amounts can also reduce your credit score. All of this leads to bad credit. Your credit score also goes down each time an enquiry is made against your financial history. Even increasing a credit card limit can mean a reduction in your overall credit score.
Your credit score is important as it indicates to a potential lender your worthiness as a lender. It helps them determine the likelihood of you repaying the loan. Because banks tend to avoid individuals with bad credit history, you will need to look into bank loan alternatives to borrow money.
If you believe there is a mistake and your credit shouldn’t be scoring low, you should order a credit report. Errors in reporting are not unheard of, so it is important to review your credit report in detail and correct any errors.
What Bank Loan Alternatives Are There?
If you have bad credit, all is not lost, however. There are still options available to you in regards to taking out a loan. Rather than apply with a bank, if you have bad credit, you should consider a bad credit loan. Bad credit loans are usually available for:
- Personal loans
- Business loans
- Low-doc or ‘low document’ loans
Bad credit loans are provided by more flexible, private lenders who are often willing to overlook or work around your poor credit history. They can however come with additional terms and higher interest rates to offset the risk to the lender.
Are There Risks Associated with Bad Credit Loans?
As with all loans, there are terms and conditions that must be adhered to. A bad credit loan does not necessarily represent any higher level of risk than a standard bank loan. As mentioned above, they will often have a shorter loan term and higher interest rate. The exact interest rate and terms will be determined by the lender after careful assessment of your individual circumstances.
If you feel that bank loan alternatives are not suited for you, the best thing you can do is focus on repairing your credit score. Understanding the difference between good and bad credit can help you get your score back on track.
Be Wary And Informed
The biggest risk to pursuing a bad credit loan is that you are vulnerable to loan sharks. Loan sharks are unscrupulous and unlicensed lenders. Often referred to as predatory lenders, their loans are accompanied by hugely inflated interest rates. Repayments are often enforced through blackmail and threats of violence.
In order to protect yourself, only ever pursue bank loan alternatives through licensed lenders. You can check if a lender is licensed online in just a few clicks.
Don’t Be Put Off By Your Bad Credit
There are bank loan alternatives from licensed lenders that can see you still borrow what you need safely. Despite their name, bad credit loans are in reality a good solution for many. Ideally, you should treat a bad credit loan as a short-term solution that gets you back in track financially. Allowing you to refinance onto a lower interest rate in future when your credit rating has had time to recover.
At Bad Credit Loans we take a common-sense approach to lending. Unlike banks, we delve deeper into the reasons behind your bad credit score. We understand that life events such as divorce, illness and loss of employment can reflect poorly and unfairly on your credit history.
Our goal is to help you move on from bad credit, keeping you informed and on track. Contact our expert team today for financial support including non-bank loans.
