debt consolidation loans australia

Can I Use Second Chance Loans to Rebuild Credit?

You’ve finally had it with credit providers turning down your loan applications. Before you stress yourself out in thinking how to get out of a financial mess, read on and learn about second chance loans and how it can possibly help you out.

Second chance loans explained

It is a type of subprime loan for people with bad credit so that they can either rebuild their credit history or finance vehicles while enjoying a favorable loan rate, or both. It usually comes with a fixed interest rate, which you have to pay within the repayment term you have selected. This type of loan has low monthly installment payment that allows you to build a positive payment record with the credit reporting agencies. You can also ask the lender if automatic payment or payroll deduction is available.

Credit builder

If you’re using a second chance loan to establish a positive credit rating, the lender will place the borrowed funds on hold until you have fully repaid the loan and release the borrowed funds to you afterwards. The creditor will report your payment history to the credit bureau while you are still repaying the loan. So, consistent payment will eventually increase your credit score. Other second chance loan providers release the funds but secure it with your bank deposit or any collateral.

Transportation financing

If you have a bad credit or a blemished one which limits your chances of getting prime loans for your car, second chance loan is a good option. It is a short-term financing that helps you pay for dependable transportation while you repair your credit history to the point where you can refinance your car into one with more favorable and cheaper loan terms.

Word of warning

As its name denotes, a second chance loan is a type of loan that gives you another opportunity to build your credit. The lender is taking on a huge risk by lending to someone who may not pay the loan altogether. So, you have to brace yourself for high interests and late fees in case of missed payments.

A better version of “second chance “loan

Debt consolidation gives consumers the opportunity to pay off other debts by rolling personal loans, credit cards, medical bills and other multiple unsecured debts, into a single monthly bill. The best way to do it is to take out a debt consolidation loan or apply for a home equity loan while following a good repayment plan. You can also transfer your debt to a zero or low-interest credit card, if you don’t have a huge consumer debt.

Here are some of the reasons why a debt consolidation loan can give you second chances:

It gives you a different perspective. Paying off multiple loans with different due dates and interest rates can be an overwhelming and stressful experience. Having multiple creditors is rather disturbing too, especially when you’re missing payment lately. The odds of answering phone calls from credit providers and opening doors to debt collectors will increase the longer you delay the payment.

When you simplify the loan, you’ll feel better about your financial situation. You’ll look at the bills and you will know what to expect, when to pay, how much to pay and the odds of being charged a fee for delayed payment. Now that the overwhelming feeling is gone, you can focus on repaying your loan and managing your finances well so you can do it better this time.

You will not end up being surprised with hefty debts

If you get a typical second chance loan and miss payments, you might realise that you got it all wrong. Rather than eliminating debts, you may get stuck with very high interests and late fees. For secured loans, you can lose your collateral too.

It was a wrong purchase decision that led you to a bad credit situation in the first place and you won’t repeat it this time.

How many times have we made wrong purchase decisions just because we are tired, happy or anxious? Even in anger, someone can buy a totally nonsense item that you would eventually pay for within several years. If you will simply take out a second chance loan using your credit card balance transfer feature, you may end up doing the same thing.

A debt consolidation loan makes it difficult for you to repeat history, unless you deliberately plan to go back to your old buying habits. Knowing how much to pay each month and following a plan that will help you pay on time, can help you get past impulsive buying and borrowing behaviors because you know exactly how much you are going to pay if you do so.

Bad credit and the experiences brought by it teach us that we can incorrectly make borrowing decisions, missing useful opportunities to improve our finances and enrich our lives. Sometimes our mistakes can be so damaging that a lot of people actually live in the streets because of similar errors. But we all deserve a second chance.

You can get second chance loans, or you can start with an improved credit file, one single loan and one creditor to repay by getting in contact with our team today on 1300 795 775 or fill out our form now!

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