Bad Credit Loans

Most of us know that having a bad credit history means that we will ultimately have to pay more for your loan. For the most part this is true. There are however some little known things that we can do to try push the cost of the loans down a few notches. In this article I’m going to explore some unconventional methods that you can use to reduce the cost of your loans and how to get the loans with the best features.

The first thing that you should be careful with is how you compare you loans. Most people have a bad habit of comparing their loans purely based on cost and nothing else. Loans should also be compared based on their flexibility too. Flexible loans will generally cost more than rigid loans. When comparing prices always make sure you are comparing loans correctly. Don’t compare the price of a variable loan versus a fixed loan. That’s like comparing apples to oranges.

Be Careful of the Financing Facility you Use
Consider what facilities you need. One of the most important facilities that a bad credit loan offers is a redraw facility. Most people won’t even think of this but it certainly is something that helps especially if you have a cash flow shortage. It allows money to move both ways in terms of the loan. If you have access money you can repay a higher amount at any said month or you can even draw down on the loan if you come up short any other month.

Its Never as Good as it Sounds
Don’t get sucked into sales pitches that center around the SVR (Standard Variable Rate). Most of the time banks will throw around this term to make you feel that you are getting a better deal than you actually are. They will tell you that your loan has an interest rate that is lower than the bank’s SVR. We won’t go into the details of how the SVR rate is determined but suffice to say that it only ever applies to about 10% of bank’s clients so it isn’t “standard” by any measure. For the most part, the SVR is high so anything lower is supposed to make you feel better.

Don’t Rely Completely on Comparison Rates
Almost all marketing savvy lenders will compare their products against their competitor’s products. 100% of the time their product will always come up on top. Yet, the funny thing is, when you have a look at their competitor’s marketing products you’ll also find that their product is the better. It's clever marketing. Don’t just rely on the marketing material to make your decision. It is absolutely vital that you go into the fine print and have a look at what they say about their advertised rates. More often than not you’ll find that the rates advertised are “honeymoon” rates that change after a couple of month.

Brokers will Almost Always try to Market an Expensive Loan to you
If you are using a broker to search for your bad credit loans then you have to be extra careful. It can certainly save you a lot of time and sometimes even save you money but you have to be sure that your broker delivers. You have to get your broker to fully explain why their loan recommendation is the best option for you. The best way to do it is in writing so that they put their reputation on paper. Ultimately you have to be sure that the broker gets the loan that works the best for you and not a loan that offers them the highest commission. Make sure they don’t charge you a brokerage fee as they would already be paid by the lenders.

The Paperwork
Keep your records clean and tidy. This way you can take a copy out whenever you need and not rely on your lender to give you copies when you need them. Most lenders will charge you extra just to get copies of your documentation like your application and approval letters or even your previous receipts. Don’t let them charge you extra for this. Just keep all the paperwork clean and tidy and you won’t need to hand over your money to the lender unnecessarily.

Choose Flexibility over Rigidity
For the most part banks hate taking risks. If they take risks you can be sure that you are the one that is going to pay for it, not the banks. If you want a fixed interest rate bad credit loan you can be 90% sure that you will be paying more compared to a variable rate bad credit loan. This is true even if you take into account the fluctuations in interest rates. Also look for loans that are flexible with repayments, redraws etc. This might seem inconsequential now but you will come to appreciate these flexibilities as you progress through the loan.

Speed is Key
Try your very best to pay off you loan quickly. Save up and forego as much stuff as you can and put all that extra cash to settling your loan. Paying off the loans interest rates is a 0 sum game. There are no benefits to you to extend the loan’s terms out longer than necessary. Ultimately it will simply mean that you’ll have to pay more for your loan.

Ultimately the trick is to get a loan that fits you perfectly. Instead of looking for the cheapest loan, look for one that first your personality needs and estimate what you’ll need from the loan in terms of facilities and flexibility.