If you have bad credit but you still need a loan, you certainly have options. Private lenders often look at more than just your credit score in order to qualify you for a loan. If you are considering filling out an application, make sure you understand the terms, and make sure that you are doing it for the right reasons.
When Not to Apply
In order to better understand when you should apply for a bad credit loan, it is often helpful to consider situations in which such a loan can do more harm than good. If you are having a hard time making ends meet between paychecks and you need a small loan, a bad credit loan is only an option if you are 100% positive that you can repay that loan on the scheduled repayment date. What’s more, you should never consider a bad credit loan for a frivolous purchase like a vacation, a new phone, or a new handbag. The interest rates associated with these loans are much higher than those associated with traditional loans, and you could find yourself in over your head.
When a Bad Credit Loan Might Be a Good Idea
Now that you know when you should stay away from bad credit loans, deciding whether you should apply becomes simpler. Any of the situations below may present an opportunity for a bad credit loan, but only if you are certain you can repay it.
- Unexpected repairs. If your refrigerator suddenly stops working, or if your car breaks down on the side of the road, you may need some quick cash to get things back up and running again. After all, you cannot pay your debts if you can’t get to work or if you have to go to a restaurant every day to eat.
- Medical expenses. Illnesses and injuries do not wait until you are financially prepared to rear their ugly heads. If you or someone in your household needs emergency medical treatment or medication, a bad credit loan can help.
- Proposed disconnection of utilities. If you are behind on your bills and are being threatened with disconnection, but you won’t have another paycheck for several days, a bad credit loan can help you keep the lights on.
- To avoid foreclosure or eviction. In some cases, if you are facing foreclosure or eviction, a bad credit loan can keep the bank or landlord off of your back.
In any of these cases, remember that a bad credit loan always has the potential to make a bad financial situation worse. If you will have access to the funds you need in the future, but you need that money right now to take care of an emergency situation, then a bad credit loan is a viable option. If you are unsure whether you will have access to the funds to repay such a loan, it is best to seek financial counseling before you apply.
Bad credit loans have saved millions of Canadian consumers in their times of financial need, but it is important for consumers to use them wisely. Taking out such a loan for frivolous reasons or without the ability to repay them can cause more harm than good.