Finding the funds needed to manage the financial pressures of life can be hard. But getting personal loans with bad credit is not impossible. Just remember that the first steps can be the decisive ones.
Those of us who are dealing with financial problems know just how much it can take over our lives. Where once we looked forward to the weekends, or weekday evenings with the family, or even a good nights sleep, now we just spend that time worrying about meeting upcoming bills. Getting personal loans with bad credit to ease the pressure is not impossible.
The fact is that lenders view applicants with low credit scores as being a risk, and lending money to them as high risk financing. But even people with low ratings can be trusted to make their repayments on time.
Once a loan is proven to be affordable, lenders find it difficult to turn an application down. So, for a personal loan, the applicant only needs to show that they can afford it, and can repay it. So, before lodging the application, there are 3 steps that should be taken to ensure everything starts on the right foot.
Find Out Your Status
This involves two steps. First of all, an applicant should find out their specific credit rating before beginning their quest for funding. This is particularly useful when seeking personal loans with bad credit as it clarifies the point of view the lender is likely to take. The lower the credit rating, the higher risk the loan is considered and the higher the interest rate charged.
The second step is to calculate what is actually affordable. For many applicants, a general figure is often quoted in an application form. This is fine when the credit rating is excellent but with high risk financing, every penny is important. So, applying for $20,000, when only $17,000 is needed may prove damaging.
If the figure seems very high in any case, go back and review the calculations. Perhaps cuts can be made that will mean a smaller personal loan, and higher chance of being approved.
Find a Lender
Often, finding the right lender is just as important as calculating the right loan sum to apply for. This is because, when applying for personal loans with bad credit, different lending institution have different attitudes towards the applicant.
For example, online lenders tend to be more understanding with applicants with low credit scores. While they will certainly charge higher than usual interest rates, they are still lower than the rates banks typically charge. This is high risk financing, after all, and so some kind of extra protection is needed.
It is best to center any lender search on those lending firms that specialize in products designed for the high risk borrower. This is because they offer personal loans at the best terms. Draw up a list of 5 or so lenders that look good, then check them out more deeply until the list is whittled down to the best one.
Consider the Terms
Finally, the terms of the loan are always important. Usually, when providing personal loans with bad credit, lenders take the opportunity to charge more in fees as well as interest, and to set strict fines for delays in repayment.
Borrowers also need to consider the length of the loan term too. This is because, while on the face of it the rate may seem great for high risk financing, over the lifetime of the loan the total paid in interest may be higher. A 5-year loan may cost $10,000 in interest, but a 10-year loan for the same sum, at a lower interest rate, may cost $15,000.
Finally, read the small print carefully. It typically reveals hidden charges that can add considerably to the overall cost of the personal loan, making the deal less than worthwhile.
Article Tags: High Risk Financing, Personal Loan, Personal Loans, High Risk, Risk Financing, Credit Rating