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Saturday, November 5, 2016

How to go about bad credit loans

Managing loans with bad credit
A good credit rating helps lower interest on personal loans
Image license: Cafe Credit Flickr; CC BY 2.0

By Dan Radak

Depending on who you ask a credit loan from, it can be anything from the worst menace to plague the mankind to the invaluable financial asset. However, there is no going around the fact that bad credit history is a burden you need to get rid of sooner rather than later. 

There are many risks that lurk in the shadow here: high interest rates, rigid terms, and devastating penalties for not honoring them. So, how to turn the bad situation around and make a sportive change? 

The good, the bad, and the ugly

There are good loans, there are bad ones, and the truth is often ugly. This depicts the realities in the financial market: You can pay the debt on time, be late, or negotiate new terms. When it comes to bad loans, think of them as a quick-fix solution to a dire situation. Yes, you may manage to get ahead financially, but you could also add fuel to the fire. After all, experts from Australian Lending Centre claim that bad credit loans are one of those problems you cannot afford to ignore because they only get bigger.

All your repayment habits are recorded, and a credit score reflects these patterns, going up and down over time. Thus, for creditors, the score is an indication of how likely a client is to repay the loan. It is important to note that they do not care about the reasons behind delays, be it a market crash or a divorce. Still, it is always advisable to notify the bank about any problems you may be facing.

Two sides of the coin

Now, bad credit loans have earned a notorious reputation due to high interest rates they involve. That is how the lenders mitigate the risk of doing business with a certain clientele. As you know, interest rates can devour a big chunk of your budget over time, albeit the thing with bad loans is that they are usually short-term. This means that the rates do not accumulate that much, yet the fact they are extremely high prescribes caution.

Moreover, failing to meet the deadline faces you with penalty fees and roll-over. That can be the last nail in the coffin of your financial health. It is also not uncommon for people to take another loan in order to pay for the original one. This is a slippery slope, and you can easily fall into a vicious cycle of loans you will find extremely hard to escape. And once the score gets low enough, you cannot even acquire traditional loans.

Therefore, always conduct the research, test the waters first, and use the loan to get your financial house in order. Different companies have varying policies when it comes to bad loans, so it is always preferable to shop around for the best offers. Know what you are getting yourself into, and what you are trying to achieve: There are many ways to minimize the level of risk and make headway into the green area.

As bad as all that

Bad credit loans are bad enough all right: They feature high interest rates and need to be repaid in time.

Thus, a black mark on the credit file can turn into a real nightmare. As a general rule of thumb, take bad loans only when they solve a pressing problem and in the case you are sure you will be able to repay them. In any case, you mustn’t let a bad credit history get in your way of achieving financial stability. So, make decisions as sound as a dollar and preserve the bright future.

About the authorDan Radak is a marketing professional with ten years of experience. He is a coauthor on several websites and regular contributor to BizzMark Blog. Currently, he is working with a number of companies in the field of digital marketing, closely collaborating with a couple of e-commerce companies.