How to Get Approved for Short-Term Bad Credit Loans
Bad credit loans help you get financing fast even with a poor credit background. They can be long-term, which run for more than three years, short-term, which usually last less than a year.
Long-Term Vs Short-Term Bad Credit Loans
Long-term and short-term bad credit loans share several traits:
Regardless of the terms, bad credit loans typically give you the options of either paying the loan back in a lump sum or periodic payments. The usual choice, however, is periodic payments because it makes the repayment affordable. It also allows you to spread out your finances on a weekly, monthly, bi-monthly or quarterly basis.
Licensed lenders of both short-term and long-term bad credit loans also abide by all state and federal loan requirements, including obtaining proper Australian credit licence or authorisation from a credit licensee before starting the business. Additionally, all bad credit loans are at risk of legal issues like fraud, defaults, tax evasion and other criminal violations that may require legal action to resolve.
Lastly, regardless of the loan terms, you are vulnerable to all predatory lenders. They take advantage of your poor credit and desperation to get financing by offering bad credit loans with very high interest and unfavourable loan terms.
There are also notable differences between the two:
Length of the repayment period
The most obvious difference between long-term and long-term bad credit loans is the length of the repayment period. Long-term loans can take around 5 to 10 years but may last as long as 30 years in some cases. Short-term loans, on the other hand, usually run from less than a year to 3 years.
Aside from the length of the repayment period, long-term and short-term bad credit loans differ in terms of the loanable amount that you can borrow. Long-term loans allow you to borrow millions in funding while short-term loans are usually limited to less than a hundred thousand dollars depending on the lender. The general rule of thumb is the bigger the loan amount, the longer the repayment period.
Loan Interest Rates and Terms
Shot-term bad credit loans also have higher and less flexible interest rates than long-term ones. This is to compensate for the shorter repayment period and also to avoid borrower default.
Bad Credit Loans Are Usually Short-Term
Because of the high risk that is associated with bad credit loans, they are generally of small amounts that are payable within a short term. The average amount that you can borrow is around $5,000 but it ranges from $200 to $10,000. The repayment period runs from several months to two years.
Some lenders, however, offer short-term bad credit loans of up to $100,000. The bigger the amount, the higher the risk of default so lenders often compensate by charging high interest and asking for a large down payment and adequate collateral.
Where to Get Short-Term Bad Credit Loans?
Banks rarely provide bad credit loans of any kind because they put great importance to good credit scores. Because the loanable amount is usually small, they earn only a little interest from this type of debt financing.
Nevertheless, many alternative lenders provide short-term bad credit loans like Loans For People With Bad Credit. These companies usually make it easier and faster for borrowers like you to secure financing by requiring little documentation and moving most of the process online.
How to Qualify
While the qualifications vary from one lender to another, they generally include:
- Australian citizenship
- Legal age
- Stable source of income
- A monthly earning of at least $1,500
- Collateral or personal guarantor
There is no surefire way to get approved for a bad credit loan regardless of its term. However, there are ways you can do to increase your chances of approval.
1. Shop around for bad credit loan rates and terms. Although bad credit loans have higher interest rates and less favourable terms than standard loans, these rates and terms differ from one lender to the next. By comparing rates, you can choose one with the lowest interest rate and most favourable term. You can also avoid falling victim to loan sharks who take advantage of your situation. These predators lend you money at an impossibly high interest rate to seize your collateral.
Make sure to do your loan shopping within two weeks to avoid further damage on your credit score. When inquiring for bad credit loan rates, your possible lender may pull out your credit profile. This hard inquiry negatively affects your credit score. However, all inquiries will be counted as one if they are made within a short period.
2. Check the eligibility criteria of short-term bad credit loans before applying. Different bad credit lenders set different eligibility criteria. Call each one to find out if you meet the criteria and to discuss your situation. Your bad credit rating hardly hurts your chances of approval for a bad credit loan, but lenders may use it as a basis for your interest rate and loan term calculations.
3. Review your credit profile. Make sure the information in your credit reports is accurate. One false or erroneous record can do great damage on your credit profile and score. You can request a free copy of your credit report from the credit bureaus once a year. If you have them, go through each information. Dispute all the errors and false data you find. The dispute process will take months but it’s worth wait. If you’ve successfully disputed and resolved an issue, your credit score could dramatically increase.
Once you secure a short-term bad credit loan, make sure to make monthly on-time payments and complete your loan repayment within the agreed period. Your good payment history will improve your credit rating, making it easier for you to secure more financing options in the future.
Got a bad credit history but in need of quick financing? Apply for a short-term bad credit loan with us. We offer bad credit loans at reasonable interest rates and terms. Call 1300 769 384 to discuss your case or fill out our Bad Credit Loan Pre-Approval from.
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