Personal loans are unsecured loans, meaning they do not require collateral. You can employ these loans for any purpose. Whether you need money to fund your vacation or you need money to fund your wedding, these loans can come in handy. However, qualifying for an unsecured loan is not a cinch. You must have a good credit score to be approved for a personal loan. As these loans do not secure any assets, lenders would be indisposed to lend you money despite a bad credit report. Does that mean you cannot use personal loans for people with bad credit scores?
No, there is still a possibility of getting the nod for a bad credit personal loan. A few direct lenders are out there who could be willing to approbate your personal loan application in spite of your abysmal credit rating, but it is worth ensuring that your score is not lower than the bare minimum score at which they accept the application.
Personal loans could be employed for a variety of reasons, but the best reasons for using these loans are as follows:
Home Renovation
Are you looking to refurbish your house? Home renovation can cost you a small fortune. It is always recommended that you have a considerable size of budget. Whether you want to convert an attic or you want to remodel the kitchen or bathroom, you can never anticipate the exact cost of renovation. Do some research in order to figure out the estimated cost of renovation, and then you will have to save more than that so you do not struggle to arrange cash to meet renovation expenses.
Even if you have a larger budget, you might fall short of cash. Here comes the role of personal loans. If your credit rating is already stellar, you would be able to qualify for a personal loan at once. Personal loans are the ideal choice to renovate your house because they allow you to repay the debt in fixed monthly instalments.
Even if you are to borrow a small amount of money to renovate your house, you should try to use a personal loan. Some people use other alternatives, but they could be quite expensive, but at the time of using a personal loan, make sure that you will not struggle to repay the debt.
Debt consolidation
Consolidation is the most common reason why people take out a personal loan. Unsecured loans are large loans. They can help you combine all your outstanding debts into one large loan. Once you receive approval for a personal loan, the money will be paid back to your creditors. It means you will no longer be obligated to pay towards your creditors. Now, you have only one large personal loan that you will pay down over a period of time.
Bear in mind a personal loan could be used to consolidate your existing dues only when your credit rating is good. It means you should apply for these loans as soon as you start struggling to repay the debt. Informing your lender before committing a default would help you receive favourable options to settle your dues.
But if your credit rating is not stellar, you will certainly find it challenging to qualify for these loans. Most of the time, lenders would be loath to lend you money if your credit rating is not so perfect. If any lender approves your application, they will charge high interest rates.
But now the question is how bad credit score is acceptable. Have you got a CCJ against you, or are you looking for CCJ bad credit loans? A CCJ is issued against you when your credit score is extremely bad. When you do not pay off debts on time, lenders have the right to take you to court. Once the matter is brought to court, a county court judgement (CCJ) will be issued.
Now, you will have to discharge the debt as per the court’s agreement. You can remove the impact of a CCJ on your credit report if you settle the whole outstanding dues in one go, but if you are past one month, even if you have satisfied the CCJ, it will remain on your credit file for the next six years, and you will struggle to obtain a loan at lower interest rates.
If you have a very bad credit rating and you want to consolidate your outstanding debts, your chances of being accepted for a personal loan are very slim.
Vacation and wedding
Another reason why you should take out a personal loan is for vacations and weddings. If you are planning a vacation, you will certainly need a lot of money, especially if you are going with family. You should have a considerable size of savings because it is a planned expenditure. Likewise, if you are going to get hitched, you should have enough money to meet wedding expenses.
The wedding and vacation budget depends on your needs. You can easily determine the cost in advance and plan your savings accordingly, but despite careful planning, you might end up having a shortfall of cash. Therefore, you will need a personal loan.
A lender would quickly approve your application if you prove your repaying capacity. At the time of borrowing money, you should ensure that you will be able to settle the debt on time.
The final word
Personal loans could be used for a variety of reasons, but the most common reasons why people use these loans include vacation and wedding, debt consolidation and home refurbishment. Personal loans do not involve any collateral, nor do they involve any guarantor. Even if your credit score is not so stellar, you would be able to qualify for these loans, but high interest rates will be charged.
Personal loans are undoubtedly a good way to meet these large expenses, but these loans are quite expensive. You should carefully research whether you will be able to repay your debt on time. Otherwise, you would fall into an abyss of debt.
