If you’re looking for a loan and you have bad credit, you may be wondering if it’s even possible to get one. The good news is that there are lenders who will work with borrowers who have a less-than-perfect credit history. However, the interest rates and fees associated with these loans tend to be higher than those offered to borrowers with good credit. Let’s explore some options!
Why is Credit History Important for Loan Applications?
First and foremost, why are lenders so interested in your credit history? Quite simply, it’s because this information helps them assess the risk of lending you money. The lower your credit score, the higher the risk that you will default on your loan. As a result, lenders will either charge you higher interest rates or deny your application altogether.
What Does it Mean to Have Bad Credit?
There is no one-size-fits-all answer to this question, as credit scores can vary depending on the scoring system used. However, in general, a “bad” credit score falls below 650 on the Equifax scale. If your credit score is in this range, you will likely have difficulty securing a loan from a traditional lender such as a bank.
The reason you have a low credit score will also affect your chances of getting a loan. For example, if you have a history of making late payments, this will be viewed more negatively than if your score is low because you don’t have a long credit history.
What Are My Options?
If you have bad credit and need a loan, there are a few options available to you:
Credit unions: Credit unions are often more willing to work with borrowers who have bad credit. They may be able to offer you a loan with more favourable terms than you would get from a bank.
Peer-to-peer lending: Peer-to-peer lending platforms connect borrowers with investors who are willing to fund loans. The terms of the loan will be determined by the platform and may be more favourable for borrowers with bad credit than those offered by banks.
Bad credit loans: Several lenders specialise in loans for people with bad credit; these loans may come with higher interest rates and fees than traditional loans, but they can still be a good option for borrowers who are unable to get financing from a bank.
However, we don’t believe that borrowing with bad credit is beneficial for people in this position. Rather than finding a workaround to borrow with bad credit, you should do everything possible to improve your score. Borrowing with bad credit or borrowing more than you can afford is likely to cause even more financial issues in the future, especially when you can’t afford the repayments.
When borrowing money, you should stick with reliable lenders like Cashify. These days, reliable lenders don’t lend to people with bad credit or those without proof of income. Responsible lending is everywhere, and this means that your best route is to boost your credit score by as much as possible. Here are some tips to achieve this in Australia:
- Check your credit file for any errors and have them corrected.
- Make all your repayments on time, including utility bills, credit cards, and other loan repayments.
- Keep your credit card balances low.
- If you have any old debts, pay them off as soon as possible.
If you follow these tips, you should be able to improve your credit score and get approved for a loan more easily. Why not get started today?