5 questions to ask yourself before you apply for a bad credit loan

5 questions to ask yourself before you apply for a bad credit loan
Written by Sarah Banks
Published on 25th January 2018
Updated on 10th December 2019
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If you’ve had problems with credit in the past, you might be wondering ‘how can I borrow money with bad credit?’. Before worrying about whether you can, you need to think about whether you should. There are a number of bad credit loans out there. However, you need to carefully consider whether a loan is the right solution for you, and if you decide it is, then you’ll need to do it in the right way.

1. Do I need to borrow money?

Before applying for bad credit loans, you need to ask yourself ‘do I need to borrow money?’, or whether there may be other options. For example, is there something else you could do to raise the funds, such as taking on extra hours at work, asking family or even selling items around the home that you don’t need anymore.

If the loan really is your only option, then don’t get carried away with how much you are going to borrow. Apply for the bare minimum you need, rather than taking out extra for treats - don’t forget, you’ll need to be able to afford the monthly repayment and interest.

2. What is the final amount I will repay at the end of the bad credit loan?

When taking out personal loans, you need to do your research and find the lender that matches your financial circumstances, as well as having an affordable APR and loan term.

You’ll need to consider whether you want to pay the bad credit loan back over a shorter period with higher monthly repayments, or lower monthly repayments over a longer loan term. Don’t forget that interest is charged over the life of the loan, so you’ll end up paying more overall if you go for a longer loan term.

The representative APR you see online or receive in a quote might not be the one you’re offered during the application.

3. Can I afford the monthly repayments?

You’ll also need to ask yourself whether you can cover the monthly repayments. Don’t forget, life is full of surprises and you’ll need to think about what would happen should circumstances change. Could you still meet the repayments if you lost your job, or if your rent suddenly increased?

Missed and late payments often come with penalties and you may be charged a fee by your lender - could you afford these charges too? Borrowing after a missed payment can be tricky, so don’t harm your credit score even more by taking out quick loans that you can’t afford.

When doing your research, try to find out the conditions for the shortest loan term you could have the loan for. If the loan term is longer than you want, then ask the lender if they have any early repayment fees, as you’ll need to factor these into your monthly budget.

Some lenders don’t charge for early settlement of the loan. You can discover these in our handy Lenders Library.

4. Will I be accepted for a loan if I have poor credit?

If you have a bad credit score, applying for loans and being declined is only going to make it worse. Lenders will think that you’re desperate for the finance and so are more likely to turn you down - it’s a vicious cycle. You can get an overview of your score and financial health by getting access to your free credit report on sites such as ClearScore or Credit Karma.

Instead of applying for any lender, do your research. The best thing to do is check your eligibility to see if you meet their acceptance criteria, as they will credit check you during the application anyway.

If you’re worried about applying for a bad credit lender, then use our Choose Wisely Eligibility Checker. This tool is super helpful if you’re not sure what to do and it won’t affect your credit score either.

5. What type of bad credit loan is right for me?

Your low credit score doesn’t have to be a hindrance if you are sure you’re going to apply for a bad credit loan. Lenders provide these specialist loans to cover customers who may have had mismanaged their money in the past, resulting in missed payments or bills, or even those who have never borrowed money before.

Learn more about bad credit loans and whether they’re the right option for you. You can also use our comparison tables to see what lending opportunities are available to you.

Bad credit loan application checklist

If you have decided that a bad credit loan is the only option for you, then our top tips checklist will help ensure that you don’t fall into any credit pitfalls or trouble down the line.

  • Check if you are eligible to apply for the loan of your choice
  • Compare the fees between different loans
  • Ensure you fully understand the costs before making an application
  • Read reviews and do your research on different loan providers to make sure you’re making the right choice
  • Check your credit file and understand what impact a loan would have on it
  • Think about how you’ll make repayments to your lender
  • Check if you have all of the required documents and information ready for when you make your bad credit loan application

Find Loans

Use the Choose Wisely Eligibility Checker to find a suitable lender in just a few minutes, without impacting your credit score.

Sarah Banks
Written by
Sarah Banks
Finance writer at Choose Wisely

Sarah joined Choose Wisely in July 2017, whilst still studying for her degree. Learning the ropes across different departments in the business including Customer Service Advisor for a period of time- making her the company’s closest link to their consumers experience with their finances.