Licensed moneylenders will always look at and take into consideration your credit score before lending you money. Thus, the only option you have is to improve your credit score. However, that may take a long time, sometimes up to years.
In this case, with a poor credit score, how can you get your loan application approved?
What Does A Bad Credit Loan Mean?
You have prepared all the necessary documents the bank requires to approve your loan request. You have also arranged the collateral and completed the paperwork. However, the licensed moneylender or bank rejected your loan application due to your low credit score. Banks and financial institutions refuse thousands of loan applications daily. Amongst them, a majority of applications are declined because of a bad credit score.
You can check your current credit score to see whether you are eligible for loans. There are many reasons for bad credit scores. This includes reaching the maximum credit card limit, delaying payments, and many others. It may be challenging for borrowers to get their loan applications approved with a poor credit score.
For such borrowers, bad credit loans can prove to be the ultimate option. These loans are specially developed for people who have not checked and improved on their credit history. You can either opt for secured or unsecured bad credit loans. The fees, repayment duration, interest rates, collateral, and other terms may vary depending on the moneylender you choose.
The Working of Bad Credit Loans
Usually, banks and credit unions are ready to provide loans to borrowers with a bad credit history. However, these lenders have to bear a higher risk. Lending money to a borrower with a poor financial history is risky. You are unsure whether the borrower will be able to repay the dues on time. In exchange for bearing higher risk, lending institutions charge additional fees and higher interest.
It is better to ascertain the fees and interest charged by lenders so that you can gain an insight into the total amount of money required for the loan. A bad credit loan is similar to a regular loan. The lender will look into various terms such as financial records, credit score, repayment potential and income sources before proceeding.
Licensed moneylenders can offer a quick loan in Singapore for people with poor credit records.
The Risk in Bad Credit Loans
There’s always a risk associated with bad credit loan borrowers. You need to ensure that you repay the loan on time and with interest. Any delay in payment or insolvency can lower your credit score and make you ineligible for future loans.
The moneylender will also have the right to seize your property in case of a contract violation.
Bad credit score can make a drastic impact on your financial future, and it can prove a problem when you are tasked to take out a loan. With everything you need to know about bad credit loans above, you can take steps forward in ensuring your financial future.