The ease of getting credit is proportional to the borrower’s credit rating. The lower the credit rating gets, the more difficult it becomes to get credit. Banks ordinarily shy away from bad credit financing because of the risk involved. After all, nobody wants to be left holding a bad debt.
However, there are institutions that do lend to bad credit people. Usually, these institutions will lend only up to $5000. Despite you bad credit history, getting a loan from these institutions should not be a difficult task. Some institutions are so customer friendly that they even offer 5000 loan no credit check.
When private lenders advance credit to bad credit people, the lenders’ risk is high. Because of these they tend to seek a higher interest rate to offset the high risk they bear. For example, a 5000 loan with bad credit usually has a higher repayment load than a loan for the same amount from a normal bank.
Financial institutions rely on a person’s credit score to evaluate the loan application and to help them decide how much they want to lend to the loan applicant. In Canada, banks are usually reluctant to consider a credit score below 600 for a loan.
However, some financial institutions including private lenders will consider a loan application from someone with less than 600-point credit score, even if this mean a slightly higher rate of interest.
Another option available to people with bad credit who need a smaller amount of money very quickly is to apply for a payday loan. Payday loans differ from bad credit personal loans in that the amount is low and the repayment period is short. The interest rates in the case of payday loans also are fairly higher than regular loans.
The term payday loans come from the fact that such loans have a repayment period up to the next payday. Any extension of the repayment period beyond the next payday could entail higher financial charges. Typically, borrowers end up paying interest rate of up to 400 percent.
Before you apply for any kind of loan, it is advisable to check your credit. This will determine which lender to approach. If your credit is bad banks won’t lend you money and it will be a waste of your time to approach them.
Review you credit report to see if there are items in there that should not be there and approach the credit report agency to have then removed.
You must always keep in mind that the higher the rating, the better your chances of getting a loan from anywhere that you can get a loan and the lower the interest rate payable.
Before you apply for any loan, especially bad credit loan, make sure that you can pay back the loan. If you default on the loan repayments, your credit history will get worse and it may take you a longer time to straighten that up, if ever.
It’s always desirable to form a debt repayment plan well ahead of getting the bad credit personal loan. Your plan should take into account your living expenses, savings goals, and debt repayment plan.
A few other things to consider when applying for a bad credit loan is that, apart from the repayment installments, you are required to pay a host of other charges. The kind of fees chargeable and the amount could vary with the lender. But they fall into a few broad categories like processing fee, origination fee, prepayment fee, late payment charge, returned check penalty and insufficient funds charges.
