Find out what you can do to get approved for a loan even if you're blacklisted or have been denied credit by a bank or credit union.

There are lenders out there who are aware of how life can be interrupted by unforeseen circumstances and are willing to help you with a quick loan - even if you have bad credit.

Your credit report can be accessed by lenders (with your permission). This report contains your personal information such as your residential address, payment history, and (more importantly) how often you apply for credit and who your credit providers are.

Your credit score is calculated in different ways depending on the company assessing your information. It all comes down to determining how much of a risk you pose to a lender.

The items on your credit report that will count against you and possibly result in you being blacklisted are:

  • Late payments on your rent, utilities, and any other credit you are paying off
  • Not paying back personal loans and defaulting on credit card payments
  • Filing for bankruptcy
  • Court judgments against you
  • Unpaid fines
  • Multiple loan applications in a short period of time

Bad debt can happen to anyone and it isn't the end of the world. You can use a loan to begin repairing your credit report if you pay it back within the set loan term. The trick is to find an affordable loan, and these 7 tips will help you do exactly that!

#1) Double-check your credit report

You can get your credit report from sites like getcreditscores.com.au. With your credit report in-hand you can make sure the information potential lenders see is accurate. If the information isn't correct, you can have it corrected or removed.

Even if the report is correct, having it can help you understand how you're being perceived by potential lenders. If you have the luxury of time before you need the loan, you can improve your credit report by paying off fines, late fees, and overdue bills. While this won't remove the negative payment history, it'll still be visible to prospective lenders and will count in your favor.

#2) Use a broker

There are a competitive range of online brokers who deal specifically with bad credit loans. They have trusted lenders with experience in helping you get the best loan for your situation.

Every time you apply for a loan, whether it's approved or not, a query is attached to your credit report. Lenders who see that you have applied for multiple loans in a short amount of time will assess you as being high risk. The higher risk you seem to be to a lender the more they will charge you in interest and other fees.

You can avoid this by applying for a loan through a broker. You will be presented with comparative offers and your credit report won't suffer.

#3) Compare bad credit loans for the best interest & fees

Don't sign up for the first offer you get off-hand. Even when using a broker, you'll have options. Compare the offers and take note of any extra fees.
The interest rate you'll be charged is important and it may vary between lenders. Other fees you should be weary of are initiation and administration fees.

When choosing a loan offer, make your decision based on the APR (Annual Percentage Rate) rather than the interest rate. The APR is the rate you will be paying including initiation and administration fees and will give you the amount of your monthly installment.

#4) Put up collateral

Collateral is the term used for a possession of value that you offer to a lender as assurance that you'll pay back your loan. If things go wrong the lender will take the item you offered as collateral and sell it to cover your loan.

Securing a loan with collateral will decrease the risk you pose to a lender. Since you now pose less of a risk to the lender they will offer you more favorable interest rates and repayment terms.

You can use vehicles or property you own as collateral as long as the value of the item is more than the amount of the loan. This is an ideal way to secure a loan if you have bad credit.

#5) Use personal loans rather than short term, high-interest debt

Short term loans at first glance seem like the best choice when it comes to loans. This is because of some advantages to short term loans. As the name implies this loan is payable over a short period of time, this can be anywhere from 16 days to 12 months. Depending on the lender you can generally borrow between $100 and $2,000. And when borrowing from Alternative lenders you won't pay a traditional interest fee.

The down-side to short term loans is that they are high-interest debt. Deposit-taking financial institutions (eg. banks) seldom extend loans to high-risk borrowers. In cases where they do, the interest rates charged to the individual are high and the repayment terms ridiculously strict.

You can turn to alternative lenders who are more flexible and open-minded. While they won't charge you the traditional interest fees, what they do charge you will mean you pay back 1 1/2 times what you borrowed. You'll pay up to a maximum of 20% of the loan amount as a once-off establishment fee. As well as up to a maximum of 4% of the loan amount per month as a service fee.

The better option when looking for an affordable bad credit loan is to choose a long term personal loan. Personal loans allow you to apply for larger sums of money that you can pay off over a longer period of time. Interest rates on long term personal loans are lower and can be highly competitive.

#6) Consider using a guarantor

This is a person who is willing to cosign a loan agreement on your behalf. The guarantor agrees to take responsibility for the repayment of your loan if for any reason you are no longer able to.

Lenders will be able to offer you better rates if you have a guarantor because it reduces the risk they take by offering you a loan. The guarantor must be an adult with a good credit record, and in some cases, they will have to own some kind of collateral.

Anyone you trust can be your guarantor, you could ask your parents, friends or even a college as long as they are willing to take the risk. A benefit of this is that you will have someone with a vested interest to hold you accountable for this debt.

#7) Be transparent about your spending

When applying for a blacklisted loan, lenders will often ask for bank statements showing the last 90 days of account activity. This is part of the risk assessment and you can use this to your advantage.

Lenders are more likely to view your application favorably if your bank account doesn't just show random cash withdrawals. Swiping your card at the grocery store, paying bills via EFT, and having other expenses come off your account as debit orders will allow lenders to see you spending money responsibly.

At the end of the day, the best way to get an affordable loan when you have bad credit is to show the lender that you're not a high risk borrower. Your past is not what they are concerned with, but rather your current ability to repay your loan.