Should You Borrow Money When You Have Bad Credit?

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It might not be the perfect timing to borrow money when you are in bad credit, but sometimes you just have to. These are the things to remember if you are caught in this dilemma. 

Know the consequences

One of the main consequences you may have to suffer if you decide to borrow with bad credit is that you’ll most likely be given a high-interest loan. This is because it is the only way for lenders to cover the risk involved in lending money to someone with bad credit.

However, don’t think that the interest rate is your only problem. You might be offered a loan with reasonable interest despite your credit, and you might be tempted to grab this opportunity. Sometimes though, these low-interest types of loans may have associated high fees, so make sure you know what you’re getting into.

Know your borrowing options

There are still a number of borrowing options for people with bad credit, however, not all of them can cause more benefit than harm.

For example, even with bad credit, you can still borrow money through a credit card cash advance. However, the fees and finance charges are simply unreasonable, and can worsen your credit than it was before. The same goes when you took out a new loan to pay for the older one. It is not really advisable to pay off your debt with another debt, except in cases wherein you can transfer your balances to a lower-interest account.

You can also explore other borrowing options which will not put you in further financial danger. For example, you can borrow from a close friend or relative, who’s willing to lend you money with little to no interest. However, if it’s too much for your pride to swallow, you can also try peer-to-peer lending or visit a pawnbroker. Even if you’re not able to pay back the loan, it won’t harm your credit and it’s just like you sold an item.

Know what further effect it can cause on your credit score

If you’re willing to suffer the consequences of borrowing money while you have bad credit, make sure that it will at least help to boost your credit. For example, find a lender who will report your payments accurately to the credit bureaus. Even if you pay a little higher than what’s normal, you might want to let go of this small amount in order to fix your credit. Of course, make sure that all your repayments are paid on time.

It’s a matter of purpose

People with bad credit are often left in a difficult situation, and most often than not, they are not in a good position to negotiate. However, sometimes you just have to bear with the consequences, because at the end of the day, it all comes down to your purpose.

Perhaps you got into an accident, suddenly lost your job, or got sick and have medical bills to pay. You might have to make a huge sacrifice in order to survive, and sometimes, you have to be willing to pay any price for it.

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