With the upcoming energy crisis, soaring inflation, increased cost of living and poor economic conditions, millions of people are struggling to make ends meet.
While traditional payday loan alternatives can offer some relief in such trying times, the struggle is worse for those with poor credit scores. If you’re looking for a loan to make ends meet but struggling to get one from traditional sources, you’re not alone.
In times like these, financial recovery may seem like an impossible task. However, we’re here to tell you that with a little planning and strategising, you can not only secure a loan but also unlock the path to financial recovery.
In this article, we will discuss a few strategies that can help you get a loan even with a poor credit score. Moreover, we will also explore how you can create a strong financial recovery plan to get out of debt and get your finances under control.
Let’s get started.
Understanding Bad Credit Loans: Secured vs. Unsecured Options
With it being difficult to get a traditional loan with poor credit scores, bad credit loans may come with a sign of relief. However, the credit market offers a wide variety of bad credit loans that come with different terms and conditions.
These loans can be divided into two major categories: secured and unsecured loans. Both of these loans offer their own set of pros and cons and have different criteria for approvals.
Secured loans typically offer high borrowing limits and low interest rates, even with a bad credit score. However, they require the borrower to use their home, vehicle, or jewellery as collateral. A secured loan, therefore, reduces the risk on the lender’s end and increases the risk for the borrower.
On the other hand, an unsecured loan requires no collateral. However, it comes with a greater interest rate and a relatively low borrowing limit because of the increased risk for the lender.
When choosing a loan, it is essential to consider your financial situation, loan requirements and the purpose of the loan. If you’re dealing with an urgent issue that requires a fairly small amount of money, an unsecured loan may be a faster option. However, if you require a larger sum, a secured loan may be the better choice.
Applying for a Loan: Getting The Most Favourable Terms
Once you’ve decided on the type of loan you want to go for, it’s time to apply for a loan. While bad credit loans are fairly easy to acquire, a few extra steps can help you get more favourable terms.
Improving Your Credit Score: While improving your credit score is a long process, a few measures before you apply for a loan can help make it slightly more favourable to you. This includes paying your bills and existing debt payments on time. Remember to keep your credit utilisation ratio at a minimum and monitor your credit report. If you find any errors or discrepancies in the report, make sure it’s rectified before applying for a loan.
Choose The Right Lenders: The online lending market is filled with a number of bad credit lenders. However, not all of them are regulated and may engage in predatory lending practices. That’s why you need to make sure you choose a reliable lender who is authorised and regulated by the Financial Conduct Authority (FCA).
Loan Terms and Interest Rates: When applying for a loan, always remember to compare the loan terms and interest rates. Some lenders may charge a higher interest than others, but you won’t know that unless you compare the terms.
That’s why it’s always a good idea to compare lenders before applying for a loan.
Developing a Debt Payment Plan and Securing Your Future
Once you’ve acquired the loan, it’s time to prepare a rock-solid debt payment and financial recovery plan.
When you receive your loan, it may be tempting to use it immediately for all your financial needs, but remember to manage the urge and prioritise. Make sure you only spend the amount you need to and use the rest to pay down the debt or any other existing debts.
Next, begin by getting a clear understanding of your monthly expenses and income. Use the information to create a budget that accounts for timely debt repayments and other essentials. If you get any additional income, like bonuses or tax refunds, use it to contribute to your debt.
Eliminate all unnecessary expenses from your monthly budget until all debt is repaid. This will not only allow you to get your finances under control but also improve your credit score.
Once you’re on track, keep an eye on your progress to stay motivated. As you slowly start to eliminate your debt, start putting aside any amount that you save. This will help you build a nest egg that you can rely on in the future.
Choose Salad Money For Fair and Affordable Personal Loans
Securing loans with a bad credit score is not just about immediate support, it’s a step towards rebuilding your credit and financial stability. However, when it comes to bad credit loans, it is essential that you choose the right lender.
As one of the largest CDFI consumer lenders in the UK, we specialise in offering fair and affordable loans to public and private employees struggling with poor credit scores.
At Salad Money, we focus on your current ability to afford a loan instead of focusing solely on past credit history. That’s why our unique affordability assessment system analyses your ability to repay a loan with the help of open banking technology.
Applying for one of our new loans doesn’t impact your credit score. We use Open Banking in our initial assessment. If successful, we report your loan to the CRA’s (Credit Reference Agencies). Your credit score won’t hold you back from being eligible.
To learn more about our services, click here or get in touch with us now!
