Getting loans as a single mother is challenging; however, if one has bad credit, this compounds the problem. When it comes to emergency cash, single mothers need to be educated and aware of how to apply for bad credit loans. In fact, when one is granted a bad credit loan, it gives them the chance to get back on their feet after the financial mistakes done.
Bad credit loans carry higher interest rates
Single mothers should note that when they apply for bad credit loans, they need to pay a higher rate of interest. However, if you are successful in paying off the loan in time, you will end up improving your credit score.
Take the help of financial consultants when it comes to bad credit
Experts say that when it comes to bad credit loans, you should talk to financial experts to know what it precisely means and how it can actually bail you out as a single mother from a financial crisis. In simple terms, a bad credit loan is another name for a personal loan that you can take in the event of emergencies or for other reasons that pertain to your home, car, education, etc. If you, as a single mother, have a sudden need for cash to repair your car or buy a home, or even pay a medical bill, do not give up on hope. There is help available to you.
Understand what a bad credit loan means
A bad credit loan is like a personal loan that is granted to you. You need to pay back this personal loan in a set of fixed instalments every month. This loan can generally be granted to you by a bank or a financial institution; however, other private lenders often give you loans for meeting your personal cash needs.
Things to note before you apply for a bad credit loan
If you are a single mother and are in need of funds, the following points should be taken into consideration before you opt for a bad credit loan-
- If you have no urgency for the loan and have a poor credit score, focus on improving your credit score first before you submit your loan application to the bank or the financial institution that gives you a loan. When you start to improve your credit score, you will find many loan options available to you.
- In order to improve your credit score, you should start off by paying off all your bills on time. You may begin with your credit card payments. Here, you should reduce the balance of the cards due to about 30% of the credit limit that has been granted to you. Last but not least, you should not apply for new credit when you are paying off your bills.
- Understand what your credit score means. Experts from the esteemed lending company in the USA, https://www.libertylending.com/ say that you should understand what factors influence your credit score. Three factors have an impact on your credit score, and they are on-time payments, less credit utilization, and no new applications for credit. These three factors account for approximately 75% of your credit score. Making an earnest effort in the above three areas is not impossible. So, if you want to improve your chances of getting a loan, make sure that you take some time out and work on your credit score. If you are serious about improving the credit score for a loan application, you can actually see positive results in as little as 3 to 6 months with success.
- In case, you have an emergency and need the cash funds immediately; you can always approach a credit union and arrange a personal meeting with an officer there to convince them that you are a creditworthy person who can be trusted. In case you are selected for the interview, go prepared with all the documents to convince the officer that you are a good risk for the loan. Most lending institutions prefer stability. So, if you are able to convince and show them that you have lived in the same city or same house for a number of years or even worked with the same employer for several years, your application for the loan does stand a good chance for approval.
Creditworthiness – What are documents should you bring with you for the interview?
When you need to carry documents to prove creditworthiness for the interview, keep them in a file so that it is easy for the loan officer to check them. The following documents should be carried with you-
- Tax returns for at least the past two years
- Job history and details
- Carry salary slips
- List of your personal assets like car, home, etc.
- List of unsecured debts like medical bills and credit cards
- Whether you get child support or alimony
- Bank statements for savings and checking along with cash deposits
Experts say that not all of the above documents need to be produced at the time of the interview; however, you should be prepared to answer some questions that might go against you. They say that you should be prepared with answers to whether you have been involved in a lawsuit, whether you have any items in the collection, have you ever declared bankruptcy and more. The purpose of the above interview is to ascertain whether you are creditworthy or not. This interview will give you the opportunity to prove whether you are creditworthy or not. Any evidence that proves your creditworthiness will help officers grant you approval for the loan.
Therefore, as a single mother with bad credit, it is prudent for you to keep the above factors in mind always. Ensure that you are aware of the advantages and disadvantages of a bad credit loan. It is prudent to exercise caution, so if you have bad credit, always make informed choices and never make any further financial mistakes again!