Some Things to Remember if You Have Bad Credit but Still Want a Loan

Most people who have bad credit simply get on with it. It is a fact of life, and we just wait for it to improve again. But did you know that, if you have bad credit, you can get installment loans as well? What matters is that you make sure you find a loan with fair terms and conditions, and that you are able to afford it. After all, if you already have bad credit and then don’t repay your installment loans, your records will look really bad.

What Constitutes an Affordable Loan?

Only you can really answer this. Having a poor credit score will make loan repayments more expensive, but not necessarily unaffordable. What makes the more expensive is the higher interest rate, and you need to calculate your personal debt to income ratio to make sure you have enough available income to actually pay for the loan. You can calculate your debt to income ratio to see whether or not you can afford it.

The worse your credit score is, the higher your interest rate will be as well. Hence, you will have to pay back slightly more each month. However, this doesn’t have to be a huge difference. In most cases, you will simply be offered the opportunity to make payments over a longer period of time, which will bring the interest rate down.

Your income is vital, as this proves that you can repay it. The debt to income ratio will then confirm that you not only have the income to pay for it, but the disposable income that is needed. Usually, if you have a debt to income ratio of over 40%, you will be rejected, good credit or bad.

Getting it Right

Considering the above, there are two things that you need to do before you apply for a loan:

• Improve your credit score

• Get a longer loan period

Doing this, you will instantly increase your chances of approval and, thereby, the chance of getting a better interest rate. Sometimes, this may mean that you have to borrow more. For instance, if you have a $1,000 debt that still has five or six monthly payments on it, you could consider taking out a payday loan to pay it off in one go, and then pay back the payday loan. This means that your credit will be greatly improved in a single month.

Consigners

If your credit is really bed, you may be in a better position to get a loan if you have a consigner, or guarantor. This is essentially means that the lender knows that, if you don’t pay, someone else will be responsible for the payment. Finding a guarantor can be hard, because they generally have to be someone with good credit, and it also has to be someone who trusts you enough. After all, you don’t want to be the person who caused someone else to get into financial difficulty.