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Applying for Small Loans
When you’ve built a history of not keeping up with your financial obligations and other payments, you will likely have an adverse credit. As a result, it would be easier for you to get approved for credit. Lenders will be wary of lending you any money because there is a good chance that you might just repeat the same pattern as what’s clearly shown on your credit records.
Of course, not all lenders think like this. There are those that understand why some people might be in a bad credit score situation due to unforeseen circumstances. These are usually those lenders that are more than happy to look beyond your credit score. Instead, they are willing to look at other things, especially your present financial circumstances in deciding whether to grant you a loan or not.
Bad credit loan requirements
If you wish to get approved for a bad credit loan, know that lenders would want to look beyond your credit rating. A number of factors will be taken into account to give the lenders a better and more complete picture of where things stand as far as your repayment, borrowing, saving, and spending behaviour are concerned. Among these include your income, expenditure, saving habits and how much your current debt is.
How much you can borrow when taking out bad credit loans will be banked on your income. If you are getting a good regular monthly income, lenders may be able to grant you a higher sum. However, you do want to refrain from borrowing too much. You want to stick to numbers you know you won’t have a hard time paying back.
Be aware that bad credit loans are charged with higher interest costs as well. While lenders are willing to look beyond your less than ideal credit standing, they will still consider you a risky prospect. This is why it is expected that they will charge higher borrowing costs as their way of minimizing these risks.
Applying for a loan can and will be frustrating. You can’t help but wonder whether you get approved or not, and the only way of knowing is to apply and see for yourself. But there are things though that can improve your chances of getting approved.
Things to Consider Before Applying for Such Loans
You start that by knowing what lenders or organizations want. And that is to protect their capital and have a back-up plan to recoup their losses if any case a borrower defaults. Another priority would be to give borrowers a decent rate of interest on the loan, and that usually results in a good relationship with the borrower, thus compelling him to open more accounts with them in the future.
To increase your chances of getting a loan, you need to provide the lender or the bank with as many reasons as possible so they’ll feel safe about you. So where do you start? You can start with a loan proposal—a statement of what, when, and why you need it, and how you’ll repay it.
They have this so-called Six C’s of Credit which bankers consider and which will help you significantly improve approval rate.
Character – How you interact with the bank, lender, or the organization will already determine how likely you are to get approved. They are not judging you just on your credit scores but on how you generally act.
Capacity – The debt-to-income issue is often used to determine how well you handle your debts. If you have a significant amount of debt compared to your income, it’s best to settle other debts first before applying for another one.
Conditions – Economic conditions of the state or the nation can and will affect the decision of organizations and lenders, if there’s a projected dip in the economy, they likely won’t hand out loans or minimize handing them out.
Collateral – A collateral is a back-up source of repayment. Even when things go sour, bankers, lenders, or organizations will still be at ease as they a back-up to recoup their losses.
Credibility – Showing the lender that you have a clear cut plan on how you spend the money will show the lenders that you have done your research.
Contingency Plan – Having a contingency plan is a useful tool and lenders will see that you are planning ahead, taking into considerations what might happen in the future, this sits well with them as it generally lets them know that you know what you’re doing.
So evaluate yourself and prepare, do your research, and you’ll likely get your loan approved.