Are you afraid that a record in your debtors register will forever close the door to borrow money? Read about your options when applying for a loan.
It depends on what type of record it is
Companies look at the registry to review you to see if there is too much risk for them to lend you money. When approving loans, they will always take into account the seriousness of the records. Credit companies are more likely to get a blind eye on a person who accidentally paid a late phone bill five years ago, rather than a miserable man who lurches from loan to loan and has a distraint on his neck.
Non-banking firms have a higher chance
Even if your financial history is a bit shabby, you don’t have to throw a flint into the rye. Each bank has different rules and what you do not pass on one can be approved by another. However, banks are subject to stricter rules than non-banking firms, and repeated entries in the register are usually grounds for refusing an application.
The good news is that you can find greater tolerance with non-banking firms. However, this does not mean that they do not look at the registers at all – all lenders have this obligation. Therefore, marketing actions called Loan without consulting the registry are in a way misleading.
However, some companies are more lenient in assessing the applicant’s credit history. What are the advantages and pitfalls?
Beware of disadvantages
Due to higher tolerance of some companies, your credit history may not stand in the way of another loan. But always think about the possible risks. Many companies counterbalance this “indulgence” with higher interest rates and the APRC. It is companies that have the mildest rules that have the most expensive loans – sometimes you will pay more than you borrowed for the loan. This is for purely business reasons – a riskier client means a higher risk of not repaying them.
Another risk is overestimating your solvency. By not scrutinizing your current or past liabilities, the firm delegates a huge responsibility for deciding whether or not you are able to repay the loan. Therefore, before you reach for a loan, answer the following questions.
If you deduct the loan repayment from your income, how much will you pay out monthly? Is it a sufficient amount of money, or so little money that you will be all about bread and dry potatoes all month?
What happens if you lose your job? Could you cover at least three monthly payments from your savings? The answers to these questions will tell you if you are in good financial condition to apply for a loan. And if not? Try to solve the situation in another way, for example by borrowing from relatives or friends, or temporarily stifling your expenses.