“Super quick, I got lots of offers. All I had to do was choose which one! I went with Wisr because they were the cheapest. Thanks” - Angela
Firstly, it’s definitely possible.
It’s certainly harder, because these days, any missed payments, paid or unpaid defaults will be on your credit file and one of the first things lenders will do is get a copy of it.
Your credit score and history shows lenders your past performance with other companies. They’ll quickly make an assessment on how likely you are to repay them on time and in full.
It’s important to know though, that not all bad credit is created equal.
For instance, if you have paid your defaults off, that is looked at more favourably to unpaid defaults.
Also in this context, a default to an energy company is more favourable to a default to another finance company.
Learn how you can get an approval for a loan with bad credit and some practical steps you can take to improve your credit score before applying.
Like every relationship, it centres around trust. Lenders need to believe that you are going to repay them in full.
All loan applications are based on risk - essentially, the higher the risk the lender believes lending to you is, the more you’ll be asked to pay in interest and most likely fees too.
Depending on your situation, there are a couple of options you might be able to consider before applying:
A guarantor loan requires someone else (usually family members) to take equal responsibility for the repayment of the loan.
In the event that the borrower is unable to make repayments, the guarantor of the loan takes responsibility.
Essentially, this is using someone else’s (better) credit score to make your application look safer.
The No Interest Loan Scheme (NILS)
NILS is a Government initiative that lets Australian residents get a loan with no interest or fees. Amazing! But there are certain conditions:
NILS only allows eligible applicants to borrow up to $1,500 for essential goods, but there’s no credit check required.
Do you qualify for NILS?
Finally, StepUp Loans are low interest, low fee loans if you’re in a low-income bracket and can’t get credit from a bank.
Do you qualify for StepUp? You need to:
The first step to improving your credit score is pretty obvious: to find out exactly what it is!
The easiest way to do this is to request a full credit history report from one of Australia’s three credit bureaus:
Once you’ve got your credit rating, you’ll be able to see where any slip-ups in the past have caused it to drop.
This is also a great time to review your credit report and see if there are any errors that need correcting!
Once you’re happy that your credit report and score are accurate, you can take steps to improve your credit rating.
But just like an embarrassing nickname in high school, sometimes even when you’ve moved on, the past has a way of poking its head in and making our present life more difficult.
Well, even if you made some mistakes a few years ago (especially if it was something serious like bankruptcy), you may still have these shown on your credit file.
Anything in your credit file that might indicate you could fail to meet the repayments will make you seem riskier in the eyes of a lender.
The flip side is, perhaps your circumstances have changed for the better, you might be earning more money and paid down some debt. This is definitely going to be viewed more favourably.
Risk determines things like:
Long story short, the better your credit file, the better (and cheaper) loans you’ll be able to get.
First, you’ll want to check you meet the basic criteria for applying:
If you meet these criteria, the most important aspect of your application is going to be proving to a lender that you’re trustworthy.
Work out your budget.
What can you afford to repay comfortably? You may need to adjust your expectations and make sure you’re not borrowing more than you need.
Make sure your bank statements look good. Lenders will ask you to provide these, going back up to 6 months.
They’re going to be looking for things like; regular dishonours, missed direct debits, how regularly your account goes into negative and a bunch of other things. Read more about why lenders need your bank statements.
You’ll need to prepare yourself for loans with higher interest rates and fees, but there’s always a silver lining:
If you get approved and you make perfect repayments for the first year, you'll improve your credit score and you should be able to refinance your loan at a better rate, but make sure you get a loan with no fees for paying out your loan early.
Yes, it’s certainly possible. Be aware of loans like these as they may have higher interest rates and bigger fees.
Compared to someone with good credit, yes, this is more expensive as you are deemed to be a greater risk to the lender. Always speak to a financial adviser and accurately assess your ability to meet repayments before applying for a loan.
Yes, you can. If you are self-employed, you’ll need to provide additional documentation to get approved, for instance up to 2 years worth of tax returns.
To pay the least amount of interest, pay the loan off faster, make extra repayments when you can afford to and make sure you secure a loan with low fees.
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