Bad Credit Loans: What You Need to Know to Apply (& Get Approved!)December 27, 2018
About 40 percent of credit-active consumers in South Africa have bad credit.
If you’re among these people, you certainly know the drill. Every bank you approach for a loan will turn you down. And if you manage to get approved, exorbitant interest rates become the order of the day.
In a country where most households are in debt and living paycheck to paycheck, you cannot afford to have bad credit.
But does bad credit mean your financial future is forever doomed?
Here is where bad credit loans come in.
In this article, we’re sharing what you need to know about bad credit loans and what you can do to get approved.
What Are Bad Credit Loans?
It’s all in the name. Bad credit loans are personal credit facilities designed for people with bad or poor credit.
When applying for these loans, you don’t have to worry about your credit score at all.
Who Offers Bad Credit Loans
Because banks are the primary providers of personal loans, you’d be forgiven for approaching your local branch for a bad credit loan.
Sorry to disappoint you, but traditional banks don’t offer bad credit loans. When you apply for a bank loan, one of the first things the loan officer will do is to access your credit report. If the score doesn’t meet the bank’s minimum requirements, your application is denied – with no chance of appeal.
The good news is micro and online lenders are emerging. These financial institutions don’t care about your credit score. As long as you can demonstrate your ability to service the loan, bingo!
What Are the Different Types of Bad Credit Loans?
Bad credit loans vary from lender to lender. In most instances, however, you’ll come across the following types of loans.
These are short-term loans for people in employment. You borrow against your paycheck, and when the next payday comes around, the amount is automatically deducted from your salary.
Do you own a car, an apartment or a home?
You’re in luck because you can use your ownership title to get a loan.
The asset, which must have a greater value than the amount of credit you’re seeking, is secured against the loan. As such, lenders have no reason to evaluate your creditworthiness. They can seize the asset upon default.
These are long-term loans (often up to 60 months). You repay them in equal monthly installments.
What Can I Do to Get Approved?
The existence of bad credit loans doesn’t mean just about anyone qualifies.
First, you need to have an income (either from formal or self-employment), or an asset you can use as collateral.
If you’re counting on your income, the lender will ask you to provide your most recent paychecks, as well as proof of employment. And if you’re self-employed (you have a business), you’ll need to attach bank statements.
You’ll also need to provide valid identification information.
Time to Get Your Money!
Now that you know all about bad credit loans, it’s time to make your application.
But do you know any potential lenders? It’s fine if you don’t!
At Hoopla Loans, we match borrowers with bad credit loan lenders. All you need to do is submit an application and wait for our system to work its magic!