Every individual should have some funds to secure themselves and their future. It helps people always to be aware of what they have and what they do not. When individuals do not have enough money, they take loans as they are the best solution for people in times of crisis. There are various kinds of loans available in the market for various purposes, and the terms of each loan are different from that of the other. Due to a poor credit score, some people resist taking loans, but it is now possible to get one as there are also Bad credit loans that help such individuals.
Why do people need a bad credit loan?
Bad credit loans should be availed of only when necessary, and these situations can be the following:
- If several lenders have rejected the loan application because of the low credit rating
- If there have been defaults in the credit card payments
- If there is no other way to manage the current debts
- If the financial situation has improved and a person is capable of repaying the loan to repair the credit score
Besides this, it is not usually advised to take such loans because the interest rates are higher than the others.
How to secure this loan?
The chances of securing Bad credit loans can increase with the following:
- Proving that the individual can repay the EMIs: even with a low credit score, lenders easily offer a loan if an individual has experienced an increase in their earnings, and the same is proven to them that the person can repay their monthly EMI easily.
- Providing collateral: providing collateral to the lender increases the chances of securing a loan because, in this case, the risk involved with an individual decreases further, making a lender feel confident about the loan they are about to offer to a person. If the person fails to pay back on time, the lender can then sell or auction their collateral to recover the outstanding amount of debt.
- Apply along with a co-applicant: applying for a loan with a creditworthy co-applicant is an advantage as the chances of securing a loan in the eyes of the lender increases. So, any person with a poor credit score can apply for a loan if they have a co-applicant with them.
Are there other alternatives for it?
Some of the best alternatives of Bad credit loans can be the following:
- Speaking with the current financial adviser who can offer a tailored plan and consider the individual’s circumstances is better because, in this case, the correct help can be provided timely.
- An individual can also take an overdraft on their current account because the interest rate, in this case, is 0% up to a certain amount. Besides, crossing the overdraft amount can be expensive for the individual as the overdraft fee is extremely high.
- There are community-operated credit unions that are the best alternatives to a bank and have the best solution to offer for people who are going through a fiscal crisis. An individual must be a member of the credit union to get the loan. Besides, these organizations are supportive towards individuals as their main intention is to serve people and help them in times of need.
- Another option available for people with a poor credit history is credit cards as they are specially designed for these purposes but using a credit card along with a failed application can be of damage and not advisable at all.
- Payday loans are offered to people with bad credit history though it is not necessary to take this in the long term.
- It is always good to use one’s savings for as long as possible rather than paying high rates of interest on loans.
- There are several interest-free budgeted loans offered by the government for people who are not able to pay their rent or other utility bills. All those who fulfill the requirements and are needy will get the loan in no time.
- Asking family and friends for a loan is another good option as the individual can work a deal with them and mutually benefit from it in the long run. Besides, these people are more understanding than all the financial institutions and do not create pressure for repayment as well as have to offer money at low and feasible interest rates. Further, agree on a time frame for repayment and ensure that it is done within the same to avoid ruining relations in the future.
It is also very important to stay away from all the loan sharks as they may affect the credibility of an individual even more and ruin the chances of landing Bad credit loans that are not at all advisable.
What are the documents required?
Some of the essential documents that are needed for an application towards Bad credit loans include the following:
- PAN card
- Statement of the salary account for the past two months
- Salary slips for the past two months
- Passport size photographs
- Rental agreement copies for people who reside in a rented home
- A passport or Aadhar card
Once all these are submitted, the loan application can move forward smoothly, and if all the documents are correct, the amount is credited as soon as possible to the account of the individual.