If you are starting to build your credit or you are experiencing a financial crisis, you may as well bid goodbye to excellent credit performance, though, as you can still go back to having a good credit score if you work hard enough.
If you are asking yourself why your last application for a loan was rejected, a poor credit score might be the culprit. Don’t stress yourself out, though, as you are still able to get approved for a loan if you know how to do it.
Understanding your past performance and your credit history is the first thing you should consider before getting yourself a loan, as this is how lenders will see you. Your credit score will show them how trustworthy you are and if it is proof that you can pay them back.
Mostly, credit scores are measured from 300 to 850, with 300 as the lowest and latter the highest. The higher your score is, the more you will prove yourself not to be a risk for lenders. This will also give you a higher chance of getting approved for a loan.
Credit scores are made up of a plethora of factors. This will make your lenders like CreditNinja understand more about your trustworthiness as a credit score is made up of your credit history, debt, new credit, types of credit you are using, and your payment history. A good credit score has its advantages and perks, like having a higher chance of approval for a loan, a higher amount of investment, a higher credit limit, and the possibility of getting a lower interest rate.
Poor Credit Score
Usually, people who have a poor credit score tend to be negligent about their finances. A few examples of these are not paying for their loan, having an unsettled balance, and racking up too much credit card debt.
When you are planning to get a new credit card, make sure that you are responsible enough to have one. Always paying on time, settling past debts, and avoiding applying too many credit cards will help you avoid having a poor credit score.
Just because you have a poor credit performance, it doesn’t mean that you are not able to apply and get approved for a loan. Even then, lenders will see you as a high-risk borrower who might default on a loan and leave.
Always remember that the better your credit score, the chance you have for a negotiation for a loan. And if you have a bad credit score, it doesn’t mean that you are out of options since there are alternative loans you can opt if you need money immediately.
Types of Bad Credit Loans
Like a lot of personal loans, bad credit loans either secured or unsecured loans; it all depends on the outcome of the situation.
For secured loans, one of the requirements is to present collateral. Collateral can be any valuable items or property, such as a house or a car, in which the lender will legally collect once you are not able to pay back in due time. On the other hand, an unsecured loan will let your lender ask the help of a collections agency or any other legal mechanism to help collect the unpaid amount that you didn’t pay.
Payday loans are loans that you access if you are in dire need of cash immediately. They don’t need that much documentation and explanation as to why you are asking for a loan, as long you can pay the sum that you borrowed when your next paycheck comes.
Take note that this type of loan has quite a high-interest rate, and when you irresponsible about it, it may be a bit complicated to deal with.
Cash advances are just like payday loans. You need to issue a check with the notes of the sum that you are borrowing, the interest rate, and additional fees. When the next payday comes, you will automatically be deducted off the whole amount that is in the check.
Title loans are usually more accessible than the other two, as you can apply for them via the internet or on storefronts. They come with collateral, precisely your vehicle title, which is collected when you are not able to pay the lender back. They have a high-interest rate and must also be repaid in several weeks.
It doesn’t mean that when you have a poor credit score, you are not able to apply for a loan. Loans like the ones mentioned above are specifically designed for people with bad credit. These loans can be useful if you want to improve your credit score in the long run.
This content is sponsored by Alex Hales.