Whether you have bad credit or a stellar credit record, shopping around before choosing a loan product is a smart move. But, when you have blemishes on your credit report, you need to take additional care when you’re checking out your options.
To help make the process of shopping around for a bad credit loan as effective as possible, here are some tips from Low Income Loans Australia to get you started.
Many bad credit lenders have a reasonable amount of information online. Some provide calculators that will help you determine the amount for which you may qualify as well as the amount of your monthly payment. In some cases, potential interest rates are even available for viewing before moving forward.
So, before you consider putting in an application everywhere, review the content of multiple lender websites, read the frequently asked questions (FAQ) sections, and gather as much detail as you can before supplying any of your personal details. That way you can assess the options without having to risk compromising your credit rating.
Additionally, you also want to research the reputations of any lenders being considered. Look for unbiased reviews of the services, ideally from individuals who have obtained loans from them in the recent past. This helps ensure you are working with a reputable and trustworthy lender before you provide them with any personal information.
If you can’t find all of the information you need online, don’t be afraid to talk with customer service. Whether you choose to reach out over the phone, through web chat options, or via email, make sure and ask any questions that are particularly valuable to you. This is especially important if information is openly provided on one lender’s website but you can’t locate the same type of information on another.
In the worst case scenario, the customer service rep simply won’t have the information you are requesting. And while this might not mean you need to remove the lender from contention, it can play into your decision-making process.
Consider Government or Non-profit Loans Services
Many borrowers, especially those with a low income, know very little about different bad credit loans and advances provided by different bank, government and non-profit partnerships. Whilst these loans may be for smaller amounts (up to $3000) they will also come with lower fees and interest rates. They are a great way to actually get a loan and even start repairing your credit.
Consider Friends, Family, and Cosigners Before Applying
In situations where you know you have bad credit, it is best to consider lending options from friends or family members, including whether they are willing to cosign before you actually apply. That way, if you can get the funds you need without officially taking out a loan from a lender, you don’t have to involve your credit score at all. Additionally, if you can get a cosigner with strong credit, you can check into lending options outside of the bad credit loan market, and may be able to secure better loan terms.
Don’t Spread Out Your Applications
If you are considering multiple lenders and want to see details regarding the terms you will be offered, then consider applying to your top lenders simultaneously. Why would you want to do that? Because credit inquiries impact your credit score.
When you apply for a loan and then obtain your credit score, the inquiry is displayed on your credit report. And having too many inquiries can actually result in a lower score. But, there is a delay before your score is impacted.
That means it is better to apply to multiple lenders close together as it is less likely the previous inquiries will be displayed on your credit report. In fact, the delay in showing these credit checks is intentional, as it allows people to shop around more effectively and choose the single option that works best for them.
Even in an emergency, it is important not to rush through the research process. Otherwise, you may be stuck paying higher interest rates or getting less favorable terms when other options were available. Instead, do your best to complete the research necessary before submitting any applications. That way, if you can find some cost savings, you can choose the best option available instead of just the first one you found.