Which would you choose between excellent credit and not being in debt?
In a perfect world, everyone wants a debt-free life. In the real world, though, most Americans would choose excellent credit. With many households living paycheck to paycheck, turning to credit cards and personal loans to make ends meet is usually a necessity.
In fact, U.S. household debt is at $13.2 trillion – an all-time high.
Yet, about 68 million credit-active Americans have poor or bad credit. This denies them the chance to access credit at better interest rates, if at all.
If you’re in this group, not all hope is lost. You can still secure short term loans for bad credit. You just need to know how, and in this article, we’re telling you how.
Know the Requirements
You already know there are alternatives to loans with no credit checks. But that doesn’t mean anyone can qualify. There are other requirements you must meet.
For instance, you must have a regular income, and provide proof. Many lenders usually require certified copies of your bank statements or paystubs. If you have no verifiable income, find a job or start a small business before going in for a short term loan.
Other typical requirements include:
- An active bank account – For receiving the loan
- An active cell phone number – Should be able to receive calls and text messages
- At least 18 years of age. Some lenders don’t make loans to borrowers who are over 65 years
Know Where to Find Lenders
For decades, people have always turned to banks for their credit needs. However, the financial crisis of 2008 happened and banks stopped lending, effectively locking out people with bad credit. Since then, several online lenders and cash advance shops have sprung up.
Even though these facilities don’t have the best of reputations, they fill a crucial gap in the society. Sometimes life’s emergencies fuel the need for money. Maybe a loved gets critically ill, or you’re facing eviction. Would you rather ride out the emergency and put lives at risk or seek financial help?
Knowing where to find these lenders, and how to identify the most reputable and reliable, makes all the difference. A quick online search for “short time learns with bad credit” will dig up thousands of results. On the first page alone, you won’t be able to tell the sheep from the wolves.
The good news is you don’t have to go through the trouble. Bonsai Finance helps you find favorable lenders offering loans at preferred rates.
Don’t Request More Than Necessary
A common mistake people on the hunt for short term loans make is requesting not only more than they need, but also more than they can afford to pay with their current income.
If you make this mistake, lenders will likely reject your application. You’ll have to submit a new application with a revised amount, but that’s beside the point.
Lenders could view your initial application as more than just an honest mistake. Requesting more than you can pay could be a sign of a lack of financial discipline. Such a signal makes you a risky borrower and reduces your chances of getting approved in subsequent applications.
So, how do you determine the right amount to request?
A rule of thumb, your debt to income ratio should never run past 36 percent. This is to say that if your gross income is $1,000, only a maximum of $360 should go to loan repayments. If the short term loan you’re eyeing is repayable in 5 months, the requested amount should be no more than $1,800.
Not all lenders, though, conform to this rule. Some require a debt to income ratio of 15 percent.
Ultimately, debt to income ratio isn’t really designed to keep you from accessing credit. It enables you to practice responsible borrowing, and to avoid punching above your financial weight.
Don’t Submit Multiple Loan Applications
Along with requesting the right amount, avoid making applications to multiple lenders.
Perhaps you’re wondering why you shouldn’t do so yet lenders of bad credit loans don’t check your credit score before making a decision.
Well, that’s correct, but when you make multiple applications, it’s possible to mistakenly submit an application to a lender who does credit checks. If that happens, your credit score will keep falling. These checks show up on your report, and they tell lenders you’re probably in financial pressure.
As we already said, your best option is to use our service, and let us help you find a favorable lender.
Consider Short Term Secured Loans
A secured loan (you provide collateral such as a vehicle or property title) is an option when you have bad credit. Since the lender takes custody of your asset or its ownership documents, there is minimal risk involved in making you a loan.
Again, don’t borrow more than you need or are able to pay
Keep in mind the temptation to overborrow is stronger when your collateral has a great market value. For instance, if your collateral is a property worth $50,000, what stops you from going for $5,000 when all you need is $1,000?
Unless the amount surpasses the lender’s lending limit, nothing stops you. But, you’ll be walking right into a financial disaster. If you default on the loan, the lender will initiate the process of recovering the asset.
Join a Credit Union
Credit unions operate like banks, but they don’t typically do credit checks, and have better loan rates.
Joining a credit union, though, isn’t an immediate solution. Depending on the union, you’ll be eligible for credit after being a member for a specified period of time. You must also build a good savings history with the union.
Even if your credit needs are urgent, don’t scrap this option off the list. Join and starting saving, however little. You could need another loan a couple of bends down the road.
Seeking Short Term Loans For Bad Credit? It’s Possible
Used properly, loans can enable you to sort out emergencies and propel you to financial freedom. With bad credit, however, securing them is usually a challenge.
Fortunately, there are short term loans for bad credit, and we have shown you how to secure them. All that remains is for you to make the move.