A bad credit loan is the most convenient way of borrowing. Despite your poor credit score, you get the nod the same day. Although the borrowing sum will not be small, these loans are perfect for funding emergencies or unexpected expenses.
Bad credit loans are a form of small online loans in Ireland. You apply for these loans despite a bad credit rating, so they have got this name. These loans are not available from mainstream financial institutions such as banks, not that you are not eligible because of a bad credit rating. Banks do not entertain applications for such a small sum. You will have to turn to direct lenders if you need small cash to meet emergency expenses.
As these loans are easily available, most borrowers do not realise the hidden drawbacks and eventually fall into debt. Since your credit rating is not stellar, you will be charged high-interest rates. The debt is to be repaid in full on the due date, so it is likely that you fail to keep up with the payment. Once you fall behind on payments, the cost will quickly add up, and eventually, you will find yourself up to your debt neck.
Here are some of the situations when you should avoid taking out bad credit loans.
- You can put off your expenditure
Bad credit loans can be a snag when you take them out to meet expenses that you can postpone. These loans have been aimed at meeting expenses that you cannot ignore. For instance, your laptop has broken down, and you need it daily for your office work. Of course, you cannot wait until you stash away funds.
If you borrow money for any inessential expenses that you can postpone, you will likely end up hurting your budget. Do not forget that you are to pay interest on what you have to borrow. As the interest rates could be high, you will end up paying double the amount.
What if you come across another unexpected expense? This might ruin your financial condition. You will likely fall behind on payments and then into an endless circle of debt.
- You use these loans for impulsive purchases
Impulsive purchases are one of the reasons why most of the people find themselves tied to debt. You should never take out bad credit loans in order to fund impulsive buys. A rule of thumb says that you should take out these loans only when you need them for urgent reasons.
During the festival season, you might be tempted to use money for several reasons, but make sure that you do not ask them for any reasons other than emergencies.
Are bad credit loans in Ireland bad?
No, bad credit loans in Ireland are not bad at all. You can use these loans during emergencies, but you need to be careful while borrowing money. The most common situation when these loans are highly recommended is emergencies. You should never use these loans to meet any expenses that are not urgent in nature or that you think you can put off. Yet, there are a few situations when it makes sense to take out a bad credit loan.
- You want to improve your credit score
Bad credit loans are also aimed at helping borrowers who want to up their credit score. A small loan cannot help improve your credit rating if you are to pay off the whole debt in one go. This is because it does not reflect your ability to adhere to the payment schedule despite changes in your financial situation.
But if you take out an instalment bad credit loan, you will certainly see improvement in your credit score provided you clear all your dues on time. Not all lenders offer these loans in instalments. If the amount is small, they will ask you to repay it outright.
However, a couple of lenders let you pay down in weekly instalments if the amount is small. This can help manage payments more easily but cannot help do up your credit rating.
Bad credit loans actually make your credit file better when the repayment length of these loans lasts for at least six months.
- To fix temporary cash flow problems
It is likely that you need a gadget that you can pay for from your pocket, but sometimes, it makes sense to use bad credit loans even though they will charge interest. This is because you will be able to retain cash for a more extended period and manage other expenses. When buying something outright disrupts your cash flow, you should use bad credit loans. In addition, you will get a chance to have your credit score improved.
If you have a credit card, go ahead with it, but make sure your card allows you to pay down in fixed instalments. Do not forget to take into account the interest you will be charged. Credit cards are generally more expensive than bad credit loans. They could come in handy if you have a zero-percent interest-free credit card.
The bottom line
Bad credit loans in Ireland can be a good choice if your purpose is to improve your credit score and when you want to use them for unexpected expenses only. In addition, they are appropriate when you want to spread the cost to be able to deal with other expenses. Loans for bad credit in Ireland should not be used for any expenses that you can put off or, discretionary expenses or impulsive purchases. If you use these loans for such costs, you will fall into debt. You should borrow money very carefully. Take help from your friends or family if you find that you cannot afford to pay back on time.