MoneyMagpie

Dec 18

What to consider before applying for bad credit loans

Reading Time: 4 mins

If your credit is not great, and you need to deal with a major expense, it can be difficult to get the money that you need. However, you do have options, when it comes to securing cash.

This means that if you are having difficulties with bad credit, you should not panic. Instead, you should carefully consider your options including using credit cards for people with poor credit, finding a loan or identifying a way of getting more cash without borrowing. You need to decide which is the best option for you, by considering the positives and negatives.

 

What are the pros and cons of bad credit loans?

You have the option to apply for a loan. Before you do this, you should think about the pros and cons.

 

Pros

There are several positives of applying for a loan, even if your credit is not great.

  • You may be more likely to be accepted for lending for people with poor credit than you would for traditional lending.
  • You can make improvements to your credit score by making payments on time.
  • Decisions on applications are normally made quickly.

 

Cons

There are negatives as well as positives when it comes to applying for this type of lending.

  • Interest rates may be higher than for other loans.
  • There are not as many lenders to choose from as there are for other forms of lending.
  • This type of borrowing is usually not the best choice for the long term.

After considering these pros and cons, you may decide that you should choose another route to go down.

 

Are there other ways to get money?

Think carefully about whether there are other ways to secure the money that you need. There may be opportunities to get additional cash that can help to take away the worry.

 

Make money from a side hustle

There are many potential side hustles that you can make money from. For instance, you may want to think about a skill that you have, such as speaking a foreign language. You can teach others this skill in return for payment.

 

Sell items that you no longer need

Most people have items around their home that they no longer use. Often these items are stored away ‘just in case’ they are ever needed. The best way to establish if you have anything of value that you can sell is to have a clear out in your home.

  • Clear out one room at a time.
  • Use boxes that are labeled so that you know what you want to sell, what you want to recycle and what you can potentially donate to charity.
  • Gather the items for sale and hold a yard sale yourself or sell the items online, using a site such as eBay.

Doing this does not just help you raise extra funds. It also means that you have a home that is free from unwanted items.

In addition to raising extra cash, you also need to consider how you can put yourself in a better situation to meet major expenses in the future.

 

Can you make better financial decisions?

Often, making poor financial decisions is the cause of having a bad credit rating. This is why, after you have dealt with your cash emergency, you need to reconsider your financial decisions. You need to treat money seriously and do all that you can to improve your credit rating. There are several things that you can do to make this happen.

 

Budget like a pro

Just like a business needs to have a complete understanding of its finances, so you need to know what money you have and what you are spending.

You cannot do this without creating a comprehensive household budget. This is not as difficult as it sounds; it just takes a little time and effort. You need to list all of your income and expenditure each month.

Do not forget to include everything you spend. Even a few dollars paid for a coffee can add up if the expenditure takes place every day.

 

Make changes based on your budget

Once you have a budget in place, you need to use it to inform your financial decisions. Take note of all the spending that you are making and decide where you can cut back. If you are really going to make a difference, you need to be ruthless.

This does not mean that you cannot have any treats in life but it does mean that you need to be realistic. For instance, do you really need to eat out every week?

 

Use the cash you save wisely

Being more careful with your money is only the start. You need to make good use of the money that you save. If you currently have a poor credit rating, putting this money towards paying off your debts can be a big help.

You should start by paying more off any credit card debts that you have as these debts usually attract the highest interest rates. It’s also a good idea to put extra money towards the smallest debts that you have. Once these debts are paid, you can then pay more off the next highest debt, until you have repaid everything you owe.

 

In summary

You can see that while applying for a bad credit loan is an option, you need to think carefully about your decision. There are pros and cons attached to this type of borrowing. You should weigh the advantages against the disadvantages.

In addition to considering the possibility of borrowing, you also need to think about other options. This could include earning more money by using a side hustle and selling items that you do not use.

Once you have secured the money that you need to deal with the current situation, you have to think about the future. This involves starting to make changes that can help you to improve your finances and your credit rating.

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