Personal loans are unsecured loans that can allow you to fund your big expenses. The length of these loans can extend over a period of one year and sometimes 18 months. Since you do not have to put down collateral, these loans are pretty expensive.
Interest rates for these loans can be slightly higher than that of secured loans. This is because these loans increase the risk of the lender lending you money. If you commit a default, they do not have any secured assets to cash out.
However, the lending industry has become so lenient that you can borrow money with a bad credit rating too. If you have a bad credit rating, you will likely pay back the money at the high interest rate. As long as you need to borrow a small amount of money, you can manage to pay off the debt.
However, when the amount s big, you will end up paying a lot of money in total. There are some people who take out a personal loan with a bad credit rating. Now the question is if it makes sense.
Does it make sense to take out a personal loan with bad credit?
A personal loan is a loan that you can take out to fund any of your big expenses. The most common expenses that you can fund with these loans are weddings, home improvement, and the like. These loans are generally expensive because they are unsecured.
It puts a more significant risk on the lender in case you permanently make a default. If you have a bad credit rating, you will likely end up paying a higher interest rate.
So, if you take the suggestion from experts, you will be told not to take out a personal loan with a bad credit rating. However, there are some situations when it becomes more crucial to take out a loan despite a bad credit rating. What can you do?
Try to arrange a guarantor
If you are not comfortable paying high interest on such loans, you should arrange a guarantor with a good credit rating who can be anyone, including your spouse.
When a guarantor enters into an agreement, it reduces the risk on the part of the lender. The lender can call upon the guarantor to pay off the debt when you fail to pay your debt.
However, it is crucial to note that if you make a default and the guarantor pays back the debt on your behalf, it will not just affect the credit rating of yours, but the guarantor’s as well.
This is why it is quite challenging to have a guarantor when it comes to borrowing money. If you have got any, make sure that you have made it clear to them in case they are unaware of it. Otherwise, it will ruin your relationship.
Take out bad credit loans in Ireland
If you cannot arrange a guarantor to take out a personal loan due to any reasons, you should seek funding for your needs with bad credit loans in Ireland. These loans have been designed exclusively to help people who have a bad credit rating.
These loans carry high-interest rates, but they may not be as expensive as personal loans with bad credit ratings. Another benefit of these loans is they can help you improve your credit score. If you make all payments on time, you will likely see improvement in your credit score.
What if both options do not suit you?
You may have difficulty arranging a guarantor and may not qualify for a bad credit loan. This situation is extremely painful because you need money and you cannot borrow. What can you do?
- You will have to put off taking out a loan. If it is too urgent, you should try to borrow money straight away from your friends or family.
- If you are able to put off taking out a loan, you should focus on improving your credit score in the meantime. Try to pay off your bills on time. Avoid the use of credit cards for regular expenses.
- You can use your credit card but make sure that you can manage to pay your credit card balance within the grace period. Otherwise, you will likely fall into debt.
The final word
It can be a bit expensive to take out a personal loan with a bad credit rating. A rule of thumb says that you should improve your credit report before you apply for these loans.
However, if you still need money, you can arrange a guarantor and seek bad credit loans. You can also use your credit card, but make sure that you pay off the balance within the interest-free period.