Tailored loans for people with bad credit
You are still able to get loan approval, despite having a bad credit score. Some lenders have a tailored application process especially for customers with bad credit.
These loans carry a fixed loan term and a once off loan amount which is then repaid in installments to a lender with interest and fees.
What is bad credit?
Bad credit is considered to be a credit score of 509 and below and seriously affects your ability to obtain credit.
You can get a bad credit history from defaulting on loans or making your payments late, filing for bankruptcy, from writs and summons and from making multiple credit applications within a short space of time.
All these factors are then recorded on your credit file with the major credit reporting agencies in Australia, namely Equifax, Experian and Dun and Bradstreet.
Repairing a bad credit score
The majority of your credit history will remain on your credit file for 5 years, however, bankruptcy and debt agreements will also be listed on the National Personal insolvency Index (NPII).
In order to repair your bad credit you will need to ensure that you keep up any and all repayments and ensure you do not take on any more credit to ensure that you can afford to pay off your debt.
If you are struggling to afford loan and credit repayments you should immediately contact your credit providers and negotiate a more manageable repayment plan.
It is also a good idea to obtain a copy of your credit file so that you can verify that all the details contained therein are accurate and that you stay clear of fraud.
What are my options if I have a bad credit record?
Having bad credit does limit your options as to where you can get credit as well as the type of credit that you can get but, it does not mean that you cannot access credit at all.
There are many lenders who specialize in offering loans for bad credit and even some who offer low doc loans to self employed individuals and those who do not meet the typical criteria for a loan.
Even with bad credit you can still apply for short-term loans, a personal loan, a vehicle loan and even a home loan.
Although you can still access these credit products you will have to pay a higher interest rate and will many times have to offer some form of security.
What can a bad credit loan be used for?
Bad credit loans can be used for virtually anything that a normal personal loan can be however, due to the higher rates typically charged on these kinds of loans there are certain application for which it is not advisable to use them.
These include for debt consolidation, for making large purchases that are unnecessary,
Affordability vs credit score
A bad credit lender will choose to take your ability to afford repayments into consideration as opposed to your credit score alone. This means that although a low credit score will not stop them from offering you a loan, overindebtness and an inability to afford repayments will.
Top loan finding tips
- Always use a loan comparison website to find the best bad credit deals
- Use a loan’s comparison rate and never just the advertised interest rate
- Always ensure the bad credit lender is registered and abides by the rules and regulations as laid out by the ASIC
- Check to ensure that you are not being charged more than the government capped rates and interest fees
Comparing loans for bad credit
Even with bad credit, it is important to always consider a wide variety of options to ensure that you get a decent price and do not pay excessive rates and fees that are simply unnecessary.
When it comes to small loans of up to $2,001 the fees and rates that any lender can charge is capped at 20% of the principal and an ongoing 4% monthly fee.
When it comes to medium loans of between $2,001 and $5,000 the maximum APR (Annual Percentage Rate) that a lender can charge is 48%. This means that taking out a bad credit loan or a payday loan has now become a lot safer.
That being said, these types of loans can still cause havoc with your finances since they are more expensive than other forms of credit and roll over’s and non-payment fees can certainly stack up.
The best way to compare any kind of loan is to use a loan comparison website since this will allow you to compare specific features side by side while viewing only direct lenders that offer a reliable service.
Documents required when applying for credit:
- 100 points ID, a Medicare card or your driver’s license
- 90 days bank statements
Typically you can apply for a loan by providing just the documents listed above however, for larger personal loans for bad credit or debt consolidation loans you will have to provide a range of additional documentation to support your application.
Alternatives to bad credit loans
- Borrow from family or friends – likely to be your best option, if you can borrow some money from family or friends you will be able save a lot in interest considering the fact that bad credit loans are so expensive.
- Borrow from work – if you need a small loan and are consider applying with a bad credit lender why not consider asking your employer for an advance on your next paycheck? This will be a lot cheaper and a lot easier than taking out a loan.
- Sell items you no longer need – if you have a bicycle in your garage or boxes and boxes of unused items in your garage why not sell some of these items to get some fast cash rather than taking out a loan? Not only do you get to de-clutter and free up space but you get to get some money as well!
- Pawn Brokers – if you have an item of value that you can pawn for a quick cash advance this is also an option but, you should be careful since pawn brokers charge very high fees and rates and if you do not make your loan repayment your item will be sold and therefore lost.