No person in this world has a perfect credit history – unless you’ve always lived on a mountain, where you never had to use banks, credit cards or pay bills. However, if you are part of the 99.9% people who rely on some sort of credit, you’ve probably heard of these myths about bad credit loans before. We’ll be the MythBusters, Australian version.
I Can’t Get A Home Loan If I Don’t Have A Good Credit History
There may have been a time when getting a bad credit loan was not an easy task. However, that was only during the Global Financial Crisis, when all banks were hitting a wall. Things have improved since then, and now there are many lenders who offer you these services – one of them being bad credit loans. Every Australian in need can get a loan, regardless of their credit history or collateral.
Moreover, there are lenders who are specialised in this type of loans. As you might already know, bad credit loans often come with higher interest rates and possibly shorter terms, although not necessarily. What matters the most is that if your credit history is tainted, you should not get all worried, because it’s easily manageable.
Bad Credit Loans Are Only For Those With Defaults
A bad credit loan can indeed help people who have defaults or who just underwent bankruptcy; however, it is also an efficient way of fixing and protecting your credit record. If you are going through hardships with your current loans, consolidating them with some bad credit loans may help you get back on track. Sure, the interest rate may be a bit higher, but if you were to calculate it, in the long run, it would help assist you in your finances.
Important note: start looking for bad credit loans before you even consider defaulting or, even worse, declaring bankruptcy. Both these tools can help you when you’re in a predicament, it’s true, but there are several strings attached to them. Bankruptcy is an extremely dangerous thing. If you make this call, it will affect your finances for the remainder of your life.
All Defaults Receive The Same Treatment
A lot of borrowers live under the impression that every default will be treated the same way; however, that’s not exactly true. For instance, if you have a default that goes under $2,000, you are very likely to receive a default that is a couple of thousands higher. It also depends on how old your default is, or how you tend to pay them (if you are not behind on them).
I’ll Have To Pay A Higher Loan Rate For 30 Years
False, Bad credit loans are seen as a solution to consolidate your debts, which means you’ll pay the loan even faster. Once you have the defaults off your record, you’ll be able to get a regular loan that has a lower interest rate.
Lenders Don’t Care About My Story
Most borrowers think that lenders only care about the “what” rather than the “why.” However, with bad credit loans, banks may focus on why you need those loans. Things such as an illness, the breakdown of marriage, losing a job, or simply needing to help a relative with an expensive surgery may have a very great impact on your life – and as a result, on your credit history. If the lender knows exactly why you reached that state, they are more than likely to come up with a solution. Banks, on the other hand, will not be interested in your story as much as private lenders.
Bad Credit Loans Are Dangerous
Not really. They’re not in the least more dangerous than any other type of loan. This myth originates in the fact that some people have taken bad credit loans knowing they were not going to be able to pay them back. The outcome? An even poorer credit score. Another thing that may account for the badmouthing of this type of loan is that people think that the lenders can offer them bad credit loans knowing, too, that they may have difficulties in repaying.
If you’re careful about the lender you work with and you do some research, no matter how simplistic, you’ll definitely be on the safe side. Keep in mind that you’re not the first nor the last person to have received a bad credit loan. And again, it is so much better to take such a loan than to declare bankruptcy or to default on your previous loan. Those things can seldom be taken out of one’s credit history.
It’s best that you consult an expert when bad credit loans are involved. This will prevent you from missing out on a good opportunity simply because you were misinformed.