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Expert Tips On The Best Lending Options When You Have Bad Credit | Commentary

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Expert Tips On The Best Lending Options When You Have Bad Credit

Applying for a loan for the first time probably is how you got to know something about having a low or bad credit score or discovered there were issues with your credit history. This article shall explore various lending options if you have a bad credit history or low credit score.

The first thing is to avoid panicking. You can find various options, including loans uniquely designed for individuals with less than pristine credit histories or scores. We have compiled some of the factors surrounding having bad credit, what bad credit loans are, and how you can turn things around and have a better credit rating.

And if you are having a hard time with debt, you can consider charities like Step Change that offers free debt advice.

What Is ‘Bad Credit’ And What Would Lead To Having It?

Lenders or creditors will check your credit history whenever you apply for a loan, unless you choose a no credit check loan which won’t leave a mark on your credit history. They review your credit information (credit file) before approving your request and lending you money. Your borrowing habits are reflected in your credit report, and it details the amount you have borrowed, if you paid it back, and whether you were on time with the payments.

In most cases, people with “bad” credit have struggled with settling their debts, forcing their creditors to leave a dark mark on their credit reports. The reasons for the failure to pay back the loans could be:

•           Not making monthly payments on time

•           Declaring bankruptcy

•           Missing payments altogether

•           A CCJ (County Court Judgement) was awarded against you

•           Entering an IVA (Individual Voluntary Arrangement)

What Are ‘Bad’ Credit Loans?

They are loans or lines of credit designed for individuals with a less than pristine credit history or low credit score. However, bad credit loans are often offered with higher interest rates because the lenders consider the borrowers a significant risk and are cautious about lend money to them.

“Bad” credit loans are available as secured and unsecured; the difference being the former requires the borrower to put up something personal and of value (like a car or house) as collateral, while the latter not does require collateral. If you fail to settle your secured bad credit loan, your lender will keep what you put up as collateral. Therefore, such a loan is a significant risk to take, especially when you are uncertain of your financial capacity to make timely repayments.

Things To Think About When It Comes To Bad Credit Loans:

Loans specifically designed for bad credit tend to be an expensive option when you need money. Before applying for such a loan, take the time to think through all your options. You might benefit from visiting a credit union for the financial help you need or considering a debt consolidation loan to help you tie things together and better manage your debts.

Avoid taking several loans at once. It could dent your credit rating, making it less likely for lenders to approve your loan request. Instead, consider using a quotation search (soft search) to determine if you qualify for a particular type of loan before applying. Doing this will not hurt your credit score.

And if you get this loan, you must repay it in full as fast as possible to avoid the burdens attributed to its high-interest rates.

A “Bad Credit” Loan Could Make Or Break Your Credit Rating

If you are confident of making all your payment on time when taking out a bad credit loan, and you do this successfully, it can positively impact your credit rating. It shows creditors you are a responsible borrower who can be trusted to settle debts on time. As a result, your chances of approval when you need to borrow money again are higher, and the loans’ interest rates will be lower.

But if you take the loan and fail to settle it within the agreed period, this could stain your credit rating, and the impact could be significant than if you had done the same with a standard loan. Such damage to your credit score and history will hurt your chances of being qualified to borrow money in the future.

How Can You Improve Your Credit Rating?

People with high credit scores or outstanding credit ratings tend to qualify for the best loan rates. It might sound discriminative, but the reasons are undeniable. Nevertheless, you can improve your credit ratings and get yourself on the right paths that improve your chances of getting a cheaper loan.

Check out our article on “10 steps for improving your credit rating and factors affecting your credit score” to learn more.


Aside from doing this, below are some tips on how you can start restoring your credit rating and building your credit score.

1.         Review your credit report regularly to confirm the information is correct and current. You can use ClearScore to do this at no charge.

2.         Also, read our checklist of things to search for in your credit report when doing the monthly review.

3.         Sign up to the electoral roll. It implies creditors that you are a viable candidate for the loan if they can verify your address.

4.         You should ensure that you pay back the money you borrow in full and within the agreed period.

5.         Know your credit limit and try not to max it out.

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Business Loans – Make The Right Choice!

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Your business needs funding and there’s no denying that! ‘You need money to make money’ and this is most applicable in the business world! While it is fairly easy to start with an awesome idea, to make a business profitable, you need to invest a good chunk of capital.

Whether to buy equipment or hire the right minds, you need capital! And the best way to go about it is to search for the ‘right’ business loan solution. Finding the ‘right’ one amongst the plethora of available options is a tricky decision.

You’ll be under stress to match the repayment frequency. And thus, your business will suffer. Hence, finalizing the right business financing solution after analyzing your business structure, repayment terms, cash-flow, and urgency is the best practice.

Here’s a detailed breakdown of which business financing solution or small business loan will help your business better!

1. For Real Estate – SBA

SBA loan is one of the most popular loans for small business owners. This is pretty straightforward to understand but involves extensive paperwork. If you need a place to kickstart your business, this is most suited for you.

It is issued by a private lending party or a bank. But the interesting part is that this loan can be guaranteed up to 85% by the federal agency—Small Business Administration (SBA). Hence, lending institutions are free and content to give the loan.

The best things about this loan are the lowest down payments and low-interest rates. If you wish to pay in the very long term, you can do so. An SBA loan involves a lot of flexibility. The condition being you should have the right financial service provider to guide you.

2. For An Equipment Or Any One-Off Loan – Equipment Financing, Term Loan

Do you need a new computer, or a tablet for your employee, or maybe a vehicle for your business’ delivery needs? Equipment financing is best suited for such kinds of needs. You can also get up to 100% financing solutions.

But there is one drawback that you should be aware of. As long as the repayments are done on time, you’ll continue to have access to the equipment. But the moment you fail short of your commitment, the lending institution has completed control over ceasing it.

A business term loan is another solution for this kind of requirement. Term loans are based on the ‘term’ that can be anywhere from 1 to 5 years. So, the repayment has to be made in that time-frame. If you’re looking for business loans in Edgewater, NJ, this will be just about right for you!

3. Need To Balance Cash Flow – Business Line of Credit

Business Line of Credit is the best financing solution that can help you with balancing your cash flow or handling any emergencies.

You get access to a limited amount of funds for a set period of time that you need to pay with interest and as soon as you pay it back, your specific balance sheet is turned back to ‘0’. This indicates that you’re again eligible for using that fund.

You can do it repetitively. There is no drawback to this mechanism. So every time you have an emergency fund need, you can look towards the business line of credit.

The only shortcoming of this system is that the interest rate is high and may require collaterals for approval. However, it is one of the most appealing choices if you need capital and have a bad credit score!

4. Credit Card Based Businesses – Merchant Cash Advance

Do you own a business that involves payments via credit cards? If yes, then the merchant cash advance is the right solution for you.

A business like retail or food chain that makes use of credit card transactions the most, can utilize merchant cash advance to boost its business. The way this financing system works is, the lender will enquire about your daily credit card transactions to the terminal provider and get your exact details. Then, he will compare it with the asked amount. If both are in accordance, you’ll become eligible for the advance.

The repayment term is interesting for this financing solution. Instead of getting a fixed rate, the advance provider will give you the figure in percentage. So every day if you make $1000 and the decided percentage is 5, then $50 will be ‘withheld’.

A merchant cash advance acts more like an investment than a loan!

5. Have No Collateral – Invoice Financing, Equipment Financing

Not all businesses have the luxury of putting collateral on the line and getting access to the desired fund. If you fall into the same category, you do not need to worry! Invoice financing can help you out even in this crunch situation.

Your account receivables serve as collateral in this financing solution and can help you get a loan up to 85% of its worth.

The only downside is the interest rate that is marginally higher than the traditional solutions.

Bonus: For A Small Duration – Short Term Loan

What if you need a loan just for 18 months? You have some debt or need to manage the cash flow, but your requirement is small. Which loan is right for you?

Well, you can opt for a short term loan. This loan gives you instant access to a lump sum of money that should be paid within the next 18 months.

The best part about this loan is that bad credit doesn’t bother the process!

This can also support businesses that need temporary loans to manage or settle a few things. Businesses that do not need some loan that lasts for years!

But just like all other financing solutions, this loan as well comes with a few drawbacks.

The first one being the annual cost will be slightly towards the higher side and the second being that a few businesses may find it hard to cope-up with the weekly payments.

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Financial advisor Helen Baker shares the six saving tricks to help you save THOUSANDS

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A leading financial advisor has shared the saving tricks that will help you to save thousands in a short amount of time, including adopting the 50/30/20 method and never signing up for financial products on your partner’s behalf.

Helen Baker, from Queensland explained that if this year has shown us anything, it’s that you need to have some spare money in the bank in case of loss of income.

Helen revealed the top tips and tricks to help you save tens of thousands of dollars, no matter what your salary or financial goals are.

Helen Baker (pictured), from Queensland, shared the saving tricks that will help you to save thousands in a short amount of time

Helen Baker (pictured), from Queensland, shared the saving tricks that will help you to save thousands in a short amount of time

1. Use the 50/30/20 strategy to control spending

The first way that Helen said you can save a bit more than you already do is by adopting the 50/30/20 strategy to control your spending.

‘This simple yet effective budgeting method involves dividing your after-tax income into three categories,’ she told FEMAIL.

Put 50 per cent of your net income towards ‘must-haves’ like rent, utility bills, school fees and groceries, then reserve 30 per cent for your ‘wants’, like dining out, fashion and entertainment.

Finally, Helen said you need to keep 20 per cent back for loan repayments or building up your savings.

This simple approach will help you to save thousands over the course of a single year.

The first way that Helen said you can save a bit more than you already do is by adopting the 50/30/20 strategy to control your spending (stock image)

The first way that Helen said you can save a bit more than you already do is by adopting the 50/30/20 strategy to control your spending (stock image)

2. Consider salary sacrificing to superannuation

Helen’s second tip involves you voluntarily sacrificing some of your salary to your superannuation.

‘If you are looking to save a deposit for your first home, the First Home Super Saver Scheme enables you make voluntary contributions in your super fund and withdraw up to $30,000 of eligible contributions towards your home deposit,’ she said.

Concessional contributions made to an approved super fund are taxed at just 15 per cent, rather than the marginal rate of up to 46.5 per cent on your regular pay.

‘If you have an income of $70,000 and want to put $15,000 towards a home deposit, you can end up paying nearly $4,875 of that $15,000 in tax,’ she said.

By contrast, if you sacrifice $15,000 a year into your super through the First Home Super Save Scheme, you pay just $2,250 in tax per year and could have around $25,000 available for a home deposit after two years.

3. Avoid signing up for products on your partner’s behalf

It might feel tempting to sign up to products on your partner’s behalf as you are a couple, but Helen said it’s best to avoid taking out a credit card, loan or mobile phone plan on your partner’s behalf, in your name.

‘If your partner falls behind on repayments, it can affect both your credit ratings, and if you break up or your partner accumulated debt, and you are married or defacto, you will be liable for their debt,’ she explained.

Avoid rushing into joint bank accounts or co-signing loans, she added.

Even though it’s important to have joint finances and accounts when you’re in a long-term relationship or marriage, you must also have your own savings and emergency fund. 

Helen said it's best to avoid taking out a credit card, loan or mobile phone plan on your partner's behalf, in your name (stock image)

Helen said it’s best to avoid taking out a credit card, loan or mobile phone plan on your partner’s behalf, in your name (stock image)

4. Hide your savings account from yourself

When you set up a savings account, there is always a temptation to dip into it when you need a boost.

But Helen said you should set up a separate bank account for your savings, and ideally one that you can’t access with your current banking app.

‘Choose a savings account that charges withdrawal fees,’ she added – as the harder and more expensive it is to access your account, more likely you are to realise your savings goals.

5. Cut your spending instead of increasing your income

Smart spending can be just as good, if not better, than increasing your income, Helen said.

‘Look at expenses that you can cull, such as a subscription that you rarely use,’ Helen said. 

You could also cut dining out as much and look after your existing items so you can use them for a longer period. 

6. Create a bill strategy 

Helen recommends that you outline all of your bills in a spreadsheet so as to avoid incurring any late fees and pay every bill when it’s due. 

‘Ensure your calendar gives you adequate time to thoroughly check invoices and make sure you are not being overcharged,’ she said.

Try to group any bills into categories of $100, $100-$500 and $500 plus. 

‘Smaller bills, such as mobile phone plans or other monthly service utilities, can be paid by setting up automatic payments,’ she said.

‘Larger bills, such as tax, rent or mortgage repayments, require more diligence. It is also crucial to pay substantial bills on time to avoid incurring a bad credit rating.’ 

Helen is a spokesperson for money.com.au. For more information, please click here

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Additional tenant protections pass Virginia General Assembly

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Virginia lawmakers passed legislation Friday that prohibits landlords from denying applications from prospective tenants solely because of bad credit accrued during the COVID-19 pandemic or because they were evicted for an inability to pay rent during the pandemic.

House Bill 5106 would apply to tenants who received the bad credit or were evicted between March 12 and 30 days after Gov. Ralph Northam’s COVID-19 state of emergency ends.

After some lawmakers raised concerns about the effect it could have on smaller landlords, a joint conference committee made up of members of the House and Senate included a provision that the law would apply only to landlords who own more than four dwelling units or own at least a 10 percent interest in more than four dwelling units.

Lawmakers passed a bill earlier this week that would require landlords to provide tenants with a payment plan before they can be evicted. The legislation includes a similar exemption for small landlords.

Both bills will head to the governor’s desk, where he can sign them into law, veto them or amend them and send them back to the General Assembly.

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