What to Do When You Need a Personal Loan for Bad Credit

Many people today turn to lenders for help when confronted with financial crises and emergencies. To cater to this growing number of requests for funds, lending companies today offer various types of loans to match the specific needs and preferences of individuals.

For instance, people with bad credit now have the chance to get approved for a personal loan more easily. What are some of the things you should do when you need a bad credit personal loan? Here are some tips:

Know your exact score. Order the latest copy of your annual credit report from the three major credit bureaus. This way, you will know what exactly your credit score is. At the same time, you will be armed with the right information that you can use when negotiating with a prospective lender.

We also advise you to take the time to examine your report and to try to catch as many errors or outdated information as you can, which could pull your credit score down. If you stumble upon unauthorized charges and outdated credit accounts, you should ask the credit bureau for correction by sending a credit dispute letter via registered mail. Upon receiving your letter, the credit reporting agency will conduct its own investigation and should it discover that your dispute is valid then; the necessary corrections will be made on your credit file. Keep in mind that cleaning up errors from your credit report can boost your score so that you can eventually qualify for a loan with a lower interest rate.

Related Post: Writing an Effective Credit Dispute Letter

Check out a credit union. It’s a good idea to check out personal loans offered by your local credit union. After all, loans provided by credit unions often have lower interest rates and flexible terms of repayment as compared to loans offered by commercial lenders.

Compare and investigate. Check out the interest rate, fees, and payment options offered by each lender. Take note that not all bad credit loans in the market are legitimate. Loans scams are prevalent and scammers often target people with bad credit because they cannot qualify for regular loans. Be sure to check a prospective lender’s background before making inquiries or requesting for quotes. Visit the Better Business Bureau’s website to know about the company’s rating and track record.

Borrow only the amount you need. Bad credit loan lenders usually charge higher interest rates to make up for the risk of extending financing to a borrower who is considered a “credit risk”. For this reason, you should only borrow the exact amount needed. Once approved for a bad credit loan, spend the loan proceeds wisely and if you borrow more than what you needed, immediately apply those funds to your loan so that you can reduce the principal.

Be cautious when applying for a payday loan. A payday loan is a short term loan that, in most cases, is payable by the borrower’s next pay check. Anyone can easily get approved for a payday loan regardless of credit history. However, obtaining a payday loan can be risky. Rollover or carrying a balance is allowed but the interest rate can prove to be very steep. If you fail to pay off your payday loan on time, you could make your financial situation much worse due to the interest and fees you would need to pay for failing to pay it off on time. This is why you should only take out a payday loan in emergency situations. Payday loans should not be used to finance something like a vacation or to purchase non-essential items.

 

About the Author:

Suzy Vanstrusen is a credit analyst and a writer on the website EZCreditRepairSolutions.com. She has been providing consumers with tips and wise information about credit repair as well as helping you out more with your bad credit loans.  Copyright © 2012
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