If you find your loan applications getting denied each time, it’s either that you have bad credit or no credit at all, and there’s a huge difference between the two. Having CCJ’s, defaults, or worse entries such as bankruptcy is far from having no prior experience with credit, and while the result of your application might be the same, there’s a slightly different approach to deal with the two.
What Loans Will Get You Approved- or Not?
Unfortunately, having bad credit or no credit means losing on the perks that you will likely get if you were someone with good credit. These include attractive rates and terms for loans or credit accounts, which are left for those with impressive borrowing history.
The good news is that, there are loans mainly designed for both bad credit and no credit individuals. It’s just a matter of choosing the right ones that will fit your needs exactly. If you’re just someone with no credit, perhaps having a guarantor or security deposit would work well on your first loan, but in worst case scenarios, you need more specialised types of lending.
For one, there are the popular payday loans, which are small loans bound to be repaid on the borrower’s next pay date. Another are doorstep loans, which work almost the same, except that the agent will collect the repayments from you every week, rather than paying in one lump sum. Lastly, there are the logbook loans, which are loans secured on the borrower’s vehicle. These loans are also paid in instalments like doorstep loans, but unlike the aforementioned loans, logbook loans offer higher borrowing capacity.
What’s the Catch?
Obviously, the main disadvantage of getting bad credit loans is that the interests are much higher than normal. This makes the entire loan more expensive to repay over the long haul.
Another catch with secured loans, such as a logbook loan, is the risk of losing your collateral. While you would certainly want to keep up with your repayment terms, you can’t always tell for sure what will happen in the future, and depending on the lender’s terms and conditions, a few missed repayments may mean repossession of your property.
Is it Worth Getting a Bad Credit Loan?
The answer is that it depends. Financially speaking, it’s not a logical idea to obtain a bad credit loan because of the high costs involved. But if you’re in dire need of cash and have exhausted all means to borrow, then go ahead and make that choice. Just be sure that you understand all the terms of the loan, as well as your borrower rights. Yes, even if you have bad credit, you still have your own rights to protect.
The good thing about bad credit loans though, is that even while it may seem unwise to get them, they can actually help better your credit worthiness. That is of course, if you comply with all the loan’s terms and always pay on time. Just like regular loans, these types of loans are reported to credit reference agencies, and your positive payments can actually become advantageous in the long run.