Can I get a loan if I`m in debt?
We all know that finding a loan has become more difficult recently. Lenders have become more cautious about their lending as a way of protecting themselves against the economic downturn.
That said, getting a loan is still very much possible - so long as you know where to look. It`s also important to understand what can affect your chances of getting a loan, or the rate you`ll be offered. In particular, your existing debts can have an impact.
Loans and existing debt
In itself, existing debt is not a bad thing - from the perspective of a lender you`ve approached. Providing you repay your debts on time, any debt you have today can show you`re good at handling credit, which will look good on your credit history and increase your chances of obtaining credit in the future.
However, it`s when you have had debt problems in the past that taking out a new loan might be more difficult. If you`ve missed any payments, this will be reflected on your credit history, and that could make lenders less likely to offer you a loan. Similarly, lenders won`t offer you a loan if they don`t think you`d be able to repay it on top of your existing debt.
What can I do if my credit history is bad?
Having a bad credit history does not mean you won`t be able to get a loan at all, although you`re likely to be offered a higher interest rate than you would if you had a good credit rating.
Some lenders will currently only offer loans to people with good credit ratings, but there are a number of loans companies that specialise in offering loans to people with bad credit ratings.
If you`re a homeowner, you could also consider taking out a secured loan. Secured loans usually offer a lower interest rate than unsecured loans, and the repayment periods offered by the lender can be longer. And because the loan is secured against your home, you may have more chance of being offered the money.
However, because this type of loan is secured against your home, your home could be repossessed if you fail to keep up on payments - so you should be absolutely certain that you can meet all your payments before you take out a secured loan.
Can a loan help me with my debts?
If you would like to make your debts more manageable by reducing your outgoings, a debt consolidation loan could help. This is a new loan that enables you to pay off your existing debts, meaning you`ll only have one debt to deal with instead of many.
Many people who take out a debt consolidation loan spread out their repayments in order to make them smaller. This can make the debt more manageable on a month-to-month basis, although you may end up paying more this way, since you will be paying interest for longer, too.
However, if you are consolidating high-interest debts such as credit cards, and the interest rate on your debt consolidation loan is lower, you could still save money overall.
If you do decide to take out a debt consolidation loan, you should be sure that you can afford your repayments. Failing to keep up on your new loan repayments will result in a `black mark` on your credit history - so if you can`t be sure, another debt solution might be more appropriate.
Fill in our form for your free loan quote
- Secured Loans
- Tips for getting approved for a loan
- Are secured loans for homeowners still available?
- Help with credit rating