Getting approval for a loan is not a cinch when your credit history is not so good. Your credit score is an acknowledgement of your past payment behaviour. Because no lender can sign off on an application without an affordability check of which credit rating is part, you are advised to keep your score up to snuff. However, it does not insinuate that you cannot get the nod when your credit rating is less than perfect.
Bad credit loans are exorbitant. As your credit history is not up to scratch, it will call your credibility into question. In order to mitigate their risks, lenders will charge high interest rates. Bear in mind that annual rates vary by lender because each lender has their own way of assessing the risk involved in lending you money. The greater the risk, the higher the interest rates will be.
To become eligible for a bad credit loan:
- You should have come of age.
- You should be a citizen of Ireland.
- You should have a stable income source.
Bad credit loans can be applied by unemployed people, but in that case, they must have a passive income source like rent, income from freelancing or a part-time job. In the absence of these sources, unemployment benefits are considered their income. Taking out a bad credit loan when you are out of work is not a good idea. You should always try to avoid borrowing money when you are unemployed, and your credit history is so bad.
Ways to get a bad credit loan
Here are the ways to get a bad credit loan:
- Compare rates
Though you can qualify for a loan despite a bad credit rating, you are strongly advised to compare rates. Every lender charges different interest rates. Some charge lower while others charge higher rates. You should always do your homework before applying for these loans.
It will help you avoid borrowing more than your affordability. People often get into an abyss of debt because they do not realise that they have borrowed more than they can afford. When you have an idea of the interest rates to be charged, you can estimate the total cost of the loan and then see whether your budget has the scope to make that payment. By comparing rates, you lower your chances of falling into a deep debt hole. While affordability checks are to be made by lenders, you cannot assume that you do not need to carefully check your repaying capacity. In the end, the burden of payments will fall on your pocket, and you will have to face dire consequences in the long run.
- Check the bare minimum score
You will find a lot of lenders offering bad credit loans, but every lender does not target the whole range of poor credit ratings. According to Experian, a poor credit score range falls between 561 and 720. It is not necessary for all lenders to accept your application when your credit score hits the lowest bottom.
Every lender has their own criteria to assess the risk involved in lending you money, but they set a particular score as the bare minimum that they want you to have at the time of applying for a loan.
For instance, some lenders do not entertain borrowers with a bad credit rating lower than 600. Make sure that you have already confirmed with a lender about the bare minimum score they prefer. Do not apply to any lender whose criteria you do not meet. Otherwise, hard inquiries will show up on your credit report, and they will make it even harder for you to borrow money at affordable rates by dropping your credit points.
- Check your credit report
It is vital to check your credit report because sometimes your score can be much lower because of identity theft. It is no surprise you are turned down by a lender or charged very high interest rates on the grounds of your credit file. Before applying for loans for bad credit in Ireland, you should always check your credit report once.
You can get a free copy once a year. Make sure that it does not consist of any unidentified accounts and erroneous information. Do not ignore to check the details of your name and address. If you find that you have become the victim of identity theft, you should immediately report it to credit reference agencies. They will take some time to resolve the issue.
- Arrange a guarantor
The chances of having a lender give the green light to your application are so bleak when your credit score is very bad. Remember that lenders also consider other factors, such as how much debt you owe and credit utilisation ratio, to decide whether or not to sign off on your application.
You should ideally avoid applying for a loan when your credit history is too bad because interest rates will be extortionately high. Emergencies make an exception, however, but you can increase your chances of obtaining lower interest rates by arranging a guarantor. The guarantor must have a good credit history.
The guarantor will be responsible for paying off the debt in case you make a default. However, remember that their credit score will also be affected if it happens. Anybody can act as a guarantor, but make sure you will not fall behind on the payment. Otherwise, it will ruin your relationship with your guarantor as well.
The final word
Short term loans in Ireland are easily available on the market, and even though your credit report is not stellar, but they carry high interest rates. You are strongly advised to improve your credit score before applying for a loan. Analyse your repaying capacity carefully to ensure you can repay the debt on time because the consequences of defaults are far-reaching.
Research and compare interest rates to find a lender who lends you money at relatively lower interest rates. Ask your friends and relatives if they know someone who offers lower interest rates.
