Experts say that we need to pay our bills on time, create a good mix of credit, lessen hard credit enquiries and retain the oldest account to get excellent credit scores. But, not everyone listens to that advice. Why?
Life happens, and sometimes, you just forget things or make wrong turns. Before you know it, your credit score dips and banks are rejecting your loan applications. Good thing, you can try your luck in finding Loans for People with Bad Credit. But, there are things you need to keep in mind to ensure that you get the right loan.
Check if you qualify for a loan
A good Non bank lender will use a soft credit inquiry (one that does not appear on your credit file) with a credit reporting company to check if you meet the lending requirement. You simply provide basic personal information and they will tell you if you prequalify before you officially apply. This is the best way to see if you can obtain a bad credit loan without hurting your score. Simply fill up an online application form, and the lender will do a soft pull to see if you are approved, the amount you are eligible to borrow as well as, its interests and fees.
What if you finally found the most affordable bad credit loans—but now you feel that the opportunity is slipping away because you did not prequalify at all?
Even if you are not pre-qualified, it doesn’t mean that you can’t take your chance. What you can do is to pull a full credit report to get detailed information about your credit status. Check if you can still make payments, dispute errors and request your credit card providers and utility providers to update late information.
After you complete a full Bad debt loans application, and provide information about your employment, salary and other relevant data, your application may be approved. Banks and mainstream lenders may require you to submit proof of income, like a copy of your recent payslip or income tax from the prior year and personal financial statement of all of your assets and liabilities.
Evaluate your personal financial status
Lenders want the assurance that they will have their money back, plus interests. So, if you want to boost your chances of getting the most affordable loans for bad credit, make sure that you can prove your ability to pay your loans.
Experts have varying opinions about what constitutes a healthy financial situation. But, they boil down into these three indicators:
First, you have a positive net worth which means, you own more than what you owe. The value of your cash and assets are higher than all your debts combined. Create a net worth statement by adding up all of your assets and subtracting debt, leaving you with your net worth.
Second, you have a positive cash flow. That means that your income is higher than your actual expenses each month. When you are making more money that what you spend, you have a positive income and a higher chance of getting approved for a loan.
Third, you have sufficient emergency coverage. Accidents, diseases and other dire financial situations may empty your pocket. Lenders want to know if you can still manage to pay your debts even when times get really hard for you and your family. If you have the right insurance coverage plus emergency funds that you can tap into during emergencies, lenders are most likely to approve your application.
Fourth, you have a positive credit score. Since you are still struggling with bad credit, it is high time to start working your way up by using a portion of your bad credit loan to settle some unpaid debts.
3) Stick to your limits
Borrowers need to manage their debts, keep up with monthly payments and never bite more than what they can chew.
When your debt is larger than what you can actually pay, and you still have other financial concerns, you will definitely have a hard time juggling between your payments. So, before you write that loan amount, make a list of all your debts, including the monthly payment, and due date to know the exact amount that you can afford to pay each month. Otherwise, there is a big probability that you will be making late payments, making to harder for you to pay off your debt.
While lenders may offer you a huge loan anyway, it is still important to borrow only the amount that you need. A debt is an advance payment for your future income, with interests. So, it’s either you borrow a huge amount of second chance loans and struggle to pay later, or you take only what you need, use it wisely and repay comfortably and on time.