It can be difficult knowing when might be a good time to borrow money with regards to your personal finances. If you have a poor credit record, then you might wonder whether you should borrow money or not. It is a good idea to always give borrowing a lot of thought as you never know when you might need money, but you need to make sure that it is the right time to borrow. So, what are the things that you should consider when borrowing if you have a poor credit record?
Finding a Loan – if you have a poor credit record, then it could be a lot more difficult for you to borrow money. This because lenders will look at your credit record to see whether they can trust you to repay the loan. If they feel that there is a risk that they will not get their money, then they will not want to lend to you. This means that borrowing may be hard as you may be turned down. Even if you can find a lender that will let you have some money, they will often up the interest rates to higher than their advertised rate if they do not like your credit record. This means that they can get more money from you to start with and then if you end up not repaying all of the loan, they will have had more form to cover their losses. There are loans which are set up for people with a poor credit record so you will not get turned down for those but you will need to be aware that your options will be more limited. You may not be able to borrow so much or for so long and they will be more expensive because the lenders take a higher risk compared with traditional lenders.
Repayments – it is really important to make sure that you will be able to repay the loan that you take out. This will be the case whether you have a good or poor credit record, but if you have a poor one it is likely that you have had or are in financial difficulties which means that you are even more likely to find things tricky. Make sure that you know exactly how much you will need to repay and when and check your household finances to make sure that you are completely confident that you will be able to repay it. Then you need to have a backup plan as well because you never know when you might have an emergency and need some extra money, so think about how you would cope then and have something worked out before you borrow money.
Credit Score – it is important to think about the impact that borrowing might have on your credit score. If you are already struggling then you need to be careful. If you apply for a loan and get turned down this will go on your credit record and it will put off other lenders. If you keep borrowing money in quick succession, this will also put off other lenders. If you use a short term loan, then some lenders will not like this either. So, bear this in mind and think about whether it might be too risky to borrow. Some lenders will let you know before you borrow, without doing a credit check, whether they will lend to you. It could be worth using one of these lenders as then there is no chance of having a declined loan appearing on your credit record. Do remember though that even if you are accepted for loan, it will not look good on your record if you miss any repayments.