Bad Credit Loans

A guide to getting credit with poor financial history

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How to get approved for a Bad Credit Loan

Now that we know what a bad credit loan is, and who they are for, and also the various types of bad credit loans, and the advantages and disadvantages, let's look at getting approved for a loan.

It doesn't take rocket science to understand what a lender may be looking for in a borrower in order to grant a loan:

Loan approved
  • Income: Being able to repay the loan.
  • Other debts and expenses: What other bills and monthly expenses do you have.
  • Past credit: Even with a bad credit loan, lenders are still going to want to review your credit history.
  • Eligibility criteria: Different lenders have different guidelines they use to grant loans, do you meet their eligibility guidelines.
.a

Preparation


Prepare Well

This is where you do your homework prior to applying for a loan. You want to narrow your odds, and increase your chances of getting approved for a loan.

The first step in many instances is to obtain a copy of your credit report and see exactly what is on it. If there are any errors, these need to be corrected.

Some people are afraid of viewing their credit history for fear of what may be on it. If you want to be approved for a loan, you need to know what is on the credit report so you can view it just as a potential lender may.

Make sure all the information is accurate. If you are unsure about an account that is showing up, you can question it with the credit bureau, or contact that lender directly.

You also may want to gather up some documents that may be requested during the underwriting process of the loan. Some lenders you can just apply online, they never speak to you, but based on various factors, they approve or reject your loan.

Other lenders may wish you to provide bank statements, wage slips, and possibly complete an income and expenditure form. Having some of this documentation to hand ahead of time can make the process easier and speed it up.

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Research


What type of loan are you considering applying for?

This may be dictated by answering the question, what is the loan for, what is the purpose of the loan? You can expect the lender to ask you this question as well. Lenders just don't grant loans without knowing what the loan is for.

Once you know what type of loan you require, then you may wish to research lenders that provide that particular type of loan.

In looking for a guarantor loan a Google search can turn up many possibilities. You can review the lender's web site, read their FAQ's, get more information on the company. You can also go to TrustPilot and read any reviews that may be posted there about the lender.

Different lenders are going to vary in what they offer in loans, as to terms, interest rate etc.

Research
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Check eligibility


The next step is to see if you are eligible for the loan. This can be a tricky thing to do, as if you apply for a loan and a lender searches your credit file, this leaves a search or enquiry on your credit report. Too many of these, as we will learn in the next chapter, can affect your credit score.

So how do you find out if you are eligible for a loan without actually applying??

Some lenders themselves and other loan comparison websites offer eligibility checkers.

These checkers are where you enter a few details about yourself, and the type of loan you may be looking for, and the checker tells you which lenders you are eligible for, and in some instances they give a percentage as to if you will be approved for the loan or not.

Qualified

These eligibility checkers do not show enquiries or searches on your credit file, so they do not affect your credit score.

A win-win situation.

Once you know you are eligible for a particular loan, you can then apply with a better degree of confidence that you will be approved.

These checkers are not guarantees you will be approved for the loan, but they do show if you are eligible.

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Showing affordability


Showing Affordability

When applying for a loan, in some instances a lender may want to see proof, or some documentation that you can afford the loan. In part A above we discussed preparation, getting prepared to apply for a loan.

We discussed gathering wage statements, and putting together an income and expense sheet, outlining all your monthly expenses against what your wages are.

By doing this, you can show a potential lender that you can afford the loan. Some lenders even have affordability calculators you can use to show the amount of money a lender is willing to lend based on your affordability.

Many lenders have guidelines they use to grant loans, and one of those guidelines may be that a borrower cannot have more than 15% of their total wages being paid out to debt. Other lenders may have different guidelines or criteria. By showing your income and expenses, the lender can see clearly what you can and cannot afford.

.e

Showing a history of credit


These eligibility checkers do not show enquiries or searches on your credit file, so they do not affect your credit score.

A win-win situation.

Once you know you are eligible for a particular loan, you can then apply with a better degree of confidence that you will be approved.

These checkers are not guarantees you will be approved for the loan, but they do show if you are eligible.