Good credit is a must for you to qualify for very competitive loans and credit card rates. Financial institutions such as banks and credit card companies utilize different information to come up with your credit score. Credit scoring is typically based on information you provide on the application, what the lender already knows about you based on your previous transactions and your credit report from one of the three credit agencies i.e. Experian, Equifax and Callcredit.
A bad credit rating is accompanied by inevitable repercussions such as being charged higher interest rates, given a smaller credit limit or your request for a loan could be rejected. A bad credit loan is an option for individuals having a bad credit rating. Bad credit loans are accompanied by high-interest rates. This is a matter of financial management, which makes sure you are safe in future. Some of the loans available for individuals having a bad credit record include:
i. Secured loans
If you have a valuable asset such as a home or a car, you can take a loan using the asset as collateral. Secured loans can be an option for you if you are looking forward to borrowing a large sum of money. The rates accompanying these loans are lower compared to rates associated with personal loans. Individuals who have had difficulties repaying their loans should be well aware of what they are getting into before putting their homes at risk.
ii. Bank overdrafts
Some banks could offer you an overdraft with a 0 percent interest. Those having interests and fees may be cheaper than interests accompanying a bad credit loan. You need to ensure that you do not go beyond the agreed overdraft.
iii. Credit unions
These are community co-operatives that are owned by members. Credit unions can offer an excellent alternative to individuals being faced with bad credit ratings. Co-operatives are much understanding and supportive of their members when it comes to financial matters. To qualify for their loans requires you to be a member.
iv. Credit cards
Referred to as “bad credit cards”, these option has a low credit limit and high-interest rates, but it is an option that is worth considering.
v. Guarantor loans
Guarantor loans are unsecured loans whereby a second person is responsible for clearing off the debt. The underwriter is expected to pay off the debt in case the person given the loan fails to repay it.