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Emergency Loans for Bad Credit Borrowers
Getting a loan is hard enough. Taking out one when you have bad credit is going to be even harder. Still, it is not impossible and there are things you can do to improve your chances. When you know where to look, you’ll find that there are options available even for those borrowers with disappointing credit scores.
If your financial need is not an emergency, take time to build your credit first. Fix your score if it is less than ideal. Pay off any outstanding debt you have. Reducing your balance can improve your credit score which will help you afford the loan you want to take out.
What to Expect
Understand that bad credit loans will have certain downsides when compared to standard loans. Your credit score makes you appear a high-risk borrower to lenders. So, to compensate the risks of extending a loan to you, expect them to subject you to high loan rates, more expensive penalties and fees, and sometimes, you might even need to provide collateral.
Where to Get Emergency Loans
Credit unions would be a good place to start if you want to get a loan despite your bad credit. They usually look beyond a borrower’s credit history and can offer very competitive borrowing rates.
Getting a guarantor may also increase your chances of getting approved. However, the guarantor will have to agree to pay the loan in the event that you will default in the future.
Another way to get a bad credit loan is to present collateral. Offering an asset to secure the loan will almost always guarantee approval even when your credit is bad.
Can I Increase My Loan Amount
How much you’ll be allowed to borrow from a bank or a lender when you take out a loan would depend on several factors. From your credit score to your current income to your current debts, banks will want to consider how much you are earning and how much you can afford to pay if they were to approve your request.
Lenders will usually do this to assess how much they would be willing to lend you. This will involve them looking into how much you are earning every amount and then comparing it to how much you are sending. There are lenders that will even look into the things that you spend your income on. Among the things they will want to know include how much you are getting paid from your job, if you are receiving any benefits, and if you have other alternative income sources.
For your outgoing expenses, they will want to know if you have existing debts or if you’re presently paying a credit card debt. They’ll want to find out how much you’re spending for regular bills, as well as other expenditures such as grocery costs, transportation costs, and leisure activity costs. They’ll want to look at what your wage slips and your bank statements say as well.
Improving Your Borrowing Power
If you want the opportunity to borrow more when taking out a loan, it helps to pay off existing debts and to close any credit line that you are not using. Improve your credit score by paying your bills on time too. You might also want to consider spending less on non-essential things every month and to shop around to get a better loan term.
You may also use other people to help increase your borrowing power. For instance, you can present a loan guarantor to get approved or a higher loanable amount. You can even apply for a secured loan by presenting collateral so lenders will be happier to lend you more.
Can I Top-Up My Emergency Loan?
If you have an existing loan and you need more money for paying off another debt or other financial obligations such as medical bills or home renovations, you can borrow more from your existing loan. In essence, you will be getting more funds from a bank or lender who provided you a loan so you can enjoy the same interest. Many people use these extra funds to consolidate debt or to finance renovations at home or car repair. Since it is not considered a new loan, you can take advantage of the same interest rate applied to your current loan.
The amount you can add up to your existing loan will depend on a variety of things such as your financial standing or affordability, as well as the value of the asset or collateral you used to secure your loan. Most lenders allow existing borrowers to borrow more money on an existing loan once they have completed at least a year of loan repayments.
One of the advantages of getting a top-up loan is that you will be able to obtain more funds at the same interest rate applied to your original loan. Many people find that one of the best ways to borrow extra funds is by getting a top-up loan. Instead of having to deal with multiple loan agreements, you only have to deal with one loan obligation which makes it more convenient and worthwhile. It is important, however, that you only take out more money if you can afford it, to avoid the risk of late payments and loan default.