The mess of loans is always threatening even if you have a good credit history and you are certain that you will not run behind payments. However, it seems menacing when you have to pay off a high interest due to a bad credit report.
Loans for bad credit with no guarantor and no upfront fees with instant decision come with high rates of interest, which are always difficult to afford. The interest can be so high that it may add up to three times larger than what you owed. Before you know about alternatives to get away with high interest rates on bad credit loans, you should know how it works.
Interest is a percentage levied on the total amount of your loan, which is usually very high. This is because these loans do not ask you to put collateral against your loan. Your credit history is already disappointing and moreover they are unsecured, therefore lenders will try to mitigate their risks as much possible as they can.
Why cannot you rebuff your credit score?
Even though you can have a loan approved despite your bad credit report, you cannot underestimate the importance of these scores. Your credit history throws light on your credibility. If your score is perfect, your lender will transfer funds at a lower rate of interest. If your score is less-than-perfect, your lender will infer that you are always banking on borrowings, which may have accounted for a high debt-to-income ratio. In this situation, they will charge a high rate of interest to lower down their risks.
Here are the ways you should follow to avoid high interest rates:
Clear all your outstanding credit card bills
Before you put in a loan application, you make sure that your credit card bills are not pending at all. Credit bureaus pull your score if you fail to clear your dues on time. To avoid being trapped in interest and penalty fees, you should not use your credit card for purchases. Instead, you should use cash and debit cards. With credit cards, you buy more than you can afford. If you make a purchase with your credit card, you should pay your outstanding amount in full by due date.
Stop rolling over
Rolling over the outstanding balance is not a wise move if you want to flinch from your obligation. If you continue to extend the repayment period, the interest amount will add up and soon you will fall into a debt spiral. Make sure that you set aside some money for your debt reimbursement as you receive your salary.
If you are handling multiple credit cards and each has outstanding bills, you should opt for balance transfer facility. Some credit card companies provide interest-free balance transfer scheme for a limited period, which does not put obligation on you toward interest. With such an offer, you may be able to clear all your dues without additional interests. However, make sure that you are able to pay back whole of your bills within stipulated time. Otherwise, you will likely be paying very high amount of interest.
Consolidate your debts
Debt consolidation means taking out a new loan to pay off previous debts. Consolidation plans are benign, as you have to manage only one larger debt instead of multiple small debts. You will pay your new debt at a lower rate of interest. It can help you pay back the loan faster. However, you need to ensure that you have enough finances to pay off each instalment. With a good credit score, you can have an unsecured consolidated debt. Otherwise, you will put collateral against the loan. The collateral, your lender will be interested in, is something that may be quickly turned into cash and its worth must be as same as the loan you owe.
As long as your credit report is excellent, you can convince your lender to lend money at affordable interest rates. However, finding a good lender is also equally important at the same time. A reliable lender knows that your score is not be-all and end-all for deciding your creditworthiness. Research extensively and ask around about a good lender. You should avoid those lenders who run hard credit check because it will pull scores from your credit report.
No matter how urgently you need funds, you can have bad credit loans disbursed immediately at lower interest rates if you rectify flaws of your report.