A bad credit loan is specifically designed for individuals with pending bills, missed payments and loan defaults. It helps individuals qualify for a loan which they struggle to get with traditional loan companies. Bad credit loan providers focus on current affordability and income rather than basing their decision on past credit mistakes.
It means if you have a consistent income, low monthly bills and no major debts, you may get bad credit loans in Ireland. However, most individuals believe that getting a loan with a bad credit score is impossible. It is not true. You may qualify for the loan if your financial situation has improved since your last missed payment.
The blog discusses certain myths associated with bad credit loans. It may help you borrow the loan for the right purposes by exploring one confidently.
Common bad credit myths that may prove expensive
Here are some common myths associated with bad credit loans:
Myth1- “Bad credit loans are only for critical needs”
Many individuals believe that bad credit loans are only for critical needs like medical emergencies. However, that’s not true. You can use a bad credit loan for short and long-term purposes like renovating your home, buying a car, or education for your child. You may get the loan based on how much money you make now and how you handle finances.
Myth 2: “All bad credit loans have high interest rates”
You may assume that a bad credit loan will prove costly to your purse. Well, yes, bad credit loans have high interest rates. However, you may get competitive rates if your recent financial performance is satisfactory.
It depends on how you manage your credit now, whether you pay the bills on time or have any heavy debt or bankruptcy. Individuals with responsible financial management and consistent income may fetch better terms.
You must explore options, check, and fetch the best APR and interest that fits your budget.
| Circumstances | Interest rates |
| Poor credit history | 2-4% higher interest rates than standard loans |
| Loan amount | Smaller loans with low payouts have lower interest rates than long-term loans with high amounts. |
| Variable interest rate | Most bad credit loans have a variable rate that may increase or decrease and impact the loan liability. |
Myth 3: You get guaranteed approval on bad credit loans
No responsible loan provider can provide a guaranteed loan approval without conducting the mandatory credit checks. If you find a company stating so, then you might be dealing with a fraud. You may only get bad credit loans with guaranteed approval if you can afford to repay the dues on time.
It showcases your ability to clear the payments and get debt-free quickly without escalating the timeline. If your finances don’t prove that, you may not get the loan. It is because no responsible company would lend more than what you can comfortably afford to pay on a loan.
Myth 4: “Bad credit loans hurt credit score”
No, it is not true. Bad credit loans do not always hurt your credit score. For example, if you apply for a short-term loan, you may get one quickly without affecting your credit score. It is because most loan companies provide one by conducting a soft credit assessment that does not impact the credit score. It instead helps you know how much you can qualify for given your income and liabilities.
However, never apply directly for loans for bad credit with a loan provider. Always use a loan calculator, eligibility checker or prequalify to determine the chances of loan approval. It is the healthy and credit-friendly way to explore loan quotes.
Myth 5: “You can only borrow small amounts”
A common myth is that you can only borrow a small amount given your bad credit history. However, that’s not a fact. You may borrow a higher amount by providing collateral, a co-signer, or a guarantor on a loan. These aspects act as security for the loan payments. Hence, you may get a higher amount at low interest rates online.
Bottom line
Thus, these are some common myths associated with bad credit loans. Understanding these is important as the credit decisions rest on this knowledge. You may get a loan for bad credit history, even with a default. However, the amounts may be low, and interest will be high given the associated risk. You can offset and improve your chances of getting affordable bad credit loans by increasing income, reducing monthly expenses, and consolidating debts.
FAQs
a) Is there a “credit blacklist” in Ireland that prevents one from getting finance?
No, there is no formal credit blacklist in Ireland. This is a common myth that prevents people from applying when they could actually qualify. Loan companies decide based on your credit report from the Central Credit Register and your application circumstances, not a blacklist.
b) Are the advertised rates the actual interest rates that I pay?
No. The advertised rate is a representative APR. Only 51% of successful applicants get it, but 49% could receive higher rates based on their affordability. Your actual rate depends on income, debt-to-income ratio, and credit history parameters.
c) Will applying for multiple bad credit loans hurt my credit score?
Yes, applying for multiple bad credit loans at once affects your credit score. It reveals you as a careless loan borrower, and you may suffer loan rejections.
Hudson is a graduate of banking and finance and works as a financial consultant at MyLoansBoat. He has a professional qualification to counsel people about money management. At MyLoansBoat, his key duties include shortlisting applications of borrowers and counseling them about credit score improvement, building an emergency cushion, retirement funds, and getting rid of debt. He is an ardent reader of finance books and uses the gained knowledge to help people with their finances. He also writes for the company’s blog on various topics like budgeting, investing, saving, debt management, joint finances, and the like. His aim is to dedicate his life to helping people have a debt-free life.
