When you apply for a loan or a new credit line, your credit provider will often first check your credit record. Your credit record reflects all your current debt and details of whether you have made regular repayments, on time. If you have not made all your payments on the due date, this will negatively affect your credit score or rating.
Individuals with a bad credit rating are less likely to have a loan amount approved as they are considered to be high risk debtors. However, there are some credit providers who offer loans with bad credit. But how does this work?
In most cases, providers of loans with bad credit simply don’t check your credit record and the assumption is that you don’t have an ideal credit rating due to the fact that you are applying for a bad credit loan. The additional risk that the provider carries in approving these loans will affect the terms and conditions in the following ways:
– You will pay a higher interest rate.
– You may be requested to pay admin fees and additional charges to service the loan on a monthly or even weekly basis.
– The loan amount will be relatively small depending mainly on your income and your ability to afford the repayments.
– The repayment period will be short, lasting anywhere from 30 days to one year. Bad credit loans are very rarely offered for a period longer than 12 months.
Your loan provider will require the following information before approving the loan amount:
– Proof of income. You will need to earn a regular income and provide payslips or bank statements that reflects the amount of your income. The provider may request these for the last 3-6 months. If you do not have a regular income, it is unlikely that the loan will be approved.
– Contact details. You will need to provide a proof of residence, your work address as well as a work, home an cellphone number. The more information you supply, the more likely that the loan will be approved.
– Social security number.
– Contact details for your next of kin or a close friend or family member who does not reside with you.
Bad credit loans are normally approved very quickly, usually within 24 hours. However, success is not guaranteed and there are a few steps that you should take before making application:
– Ensure that you have all the necessary documentation requested by the loan provider.
– Determine the amount that you will be able to afford to repay on a monthly basis. You will need to evaluate your income relevant to your current expenditure. Remember to take into account the interest rate as well as the additional fees.
– Shop around for the best deal. While interest rates and fees charged by bad credit loan providers are relatively similar, you can save some money by finding the lowest rates.
– Assess your other options. Not all regular loan providers will deny a loan simply because you have bad credit.