For people whose credit history is unsatisfactory, it doesn’t mean that it is hopeless for them to obtain personal loan. They still stand a good chance to get financial assistance. There are personal loans specially designed for people with poor credit score.
Before applying for this loan, there are many things you need to consider. You must assess your own financial situation carefully. Bear in mind that this type of loan may bring adverse effect to you if the loan is not being utilized correctly. Here are some important points you must know:
1. What is your main purpose of getting this loan? Is it used to pay off your current debt or to improve your bad credit?
It is important for you to identify the main reason you are looking for a personal loan. If you need short term financing for wedding, home improvement, traveling, purchasing a car, etc, I would strongly suggest that you should STOP your plan. There is no necessity for you to get the loan. You should focus on rebuilding your credit first. Don’t get trapped in deep debt again.
On the other hand, if you intend to fix your credit with this loan, I would say you should look for better alternative, i.e. getting a credit card to enhance your credit. Applying a credit card and using it once a month with less spending can also help to improve your credit. There is no point for you to take a loan because it will become an additional financial burden to you.
2. Is the interest rate charged by the lender reasonable? Are you willing to pay higher interest?
In general, the interest rates charged by the financial institutions for bad credit personal loans are much higher than the normal loans. This is because the financial risks faced by the lenders are higher. Besides that, there are other additional costs involved when a borrower has missed payments or late payments. Before you apply for the loan, you are reminded to check with the lenders carefully for any hidden fee. You must make sure that you are fully informed about the terms and conditions of repayment set by the lenders.
3. Can you afford to pay back the loan with your current income?
You need to evaluate your financial ability before getting the loan. You may obtain the loan easily as long as you have provided sufficient supporting documents to the lenders. But have you ever thought about your affordability? Have you worked out a realistic budget plan? You need to make sure that your monthly income is sufficient for you to make the monthly repayment. If you can’t commit on that, you are advised not to take up the loan because it will make your financial situation and your credit score worse.
In short, you can proceed with the loan application only if you are able to justify your needs and all your answers are positive. You must be extra careful and make sure that you don’t fall into the debt cycle again.