There are many reasons why people often end up with bad credit and then in a financial emergency have to opt for installment loans bad credit. The trouble with this is that the rates of interest on loans for people with bad credit are always higher than regular loans. Not only this, it is difficult to get a loan in the first place.
This is the reason that you should avoid bad credit at all costs. Not only does it impact your ability to take a loan, it also has an impact on other areas of your life like getting decent employment or getting a good place on rent. This is because potential employers and landlords also check your credit score before giving a loan and they are wary of giving jobs or properties on rent to people with bad credit.
How to avoid bad credit
The best way to avoid bad credit is to avoid debt as much as you can. Most financial experts agree that your total debt should be such that you pay only 36% of your total monthly income as instalments. The remaining money should be spent for your daily expenses and also some part of it should go into savings.
When it comes to saving money, you may have to curtail some expenses and start pulling the financial reins. At the same time, the money that you save should be invested in instruments which will help the money to grow like mutual funds, bonds, shares etc. It is also a good idea to invest in property and gold along with other commodities.
This way you can be sure that you will not have to opt for short term loans for bad credit or even avoid loans when you have good credit. This is because in event of a large expense or some financial emergency you can use your savings instead of taking a loan. This ensures that you don’t end up taking more than the amount of debt that you can comfortably repay on time.
Homeowner loans
In spite of all the planning though there may be cases when you just have to take a loan. In those cases it is always advisable to opt for secured homeowner loans rather than the unsecured loans. This is because with secured loans the lenders are taking a lesser risk and they will give you the loan on a lower rate of interest.
However, you need to bear in mind that if you are unable to repay the loan your home will be foreclosed by the lender and you will lose your home. This is why it is important to calculate the amount of loan that you take and take only the amount that you can comfortably repay.
For this purpose you should apply for a loan through loan brokers who employ skilled and knowledgeable loan advisers. These advisers will analyse your financial situation along with your monthly income and expenditure and they will suggest the loan amount that you can comfortably take.
