Bad Credit? Debt? Loan Application Do's And Don'ts

If you have bad credit and are saddled with debt, especially unmanageable debt, you might find yourself seeking help in getting your finances under control and relief with a bad credit debt loan. If you are considering applying for a personal loan to get out from under, realize that your financial circumstances put you in a high risk loan category in the eyes of most reputable lenders. The interest rate you'll pay to offset your risk status, and the extended loan term necessary to make your personal loan repayments affordable on a monthly basis, will probably end up costing you more money in the long run, but this repayment schedule will help you reduce your monthly repayment burden. 

Don't Borrow More Than You Need 

Work out how much money will make your debt obligations more manageable, and, if you qualify, don't borrow more than that, even if approved for a greater amount. Only borrow as much as you can confidently repay on time.


  • Think twice before you purchase optional payment protection. Optional payment protection is "insurance" against default and generally adds at least 20% more to your monthly loan repayment. The additional repayment burden can be difficult for people in troubled financial circumstances to repay consistently, and their situation often becomes even more unmanageable. Optional repayment protection is typically offered with personal loan applications. It's better to evaluate exactly how much you can afford to pay each month without struggle, and don't borrow above that amount.
  • Shop around and compare.  Learn what is included in a typical APR, and don't forget to include fees, penalties and other charges or you won't be able to make an accurate APR comparison. You should learn if there are prepayment charges included in any additional fees attached to the loan you are considering.
  • See if you can obtain a personal loan from a professional organization to which you belong. Having a pre-existing relationship with such a lender might help you qualify for a higher loan amount and lower interest rates. Be aware that the lower interest rate (in some instances as low as 3%) holds only until you miss a payment. After that the interest rate will be significantly higher.


Miss a payment. Even people who set up automatic debit payments each month can neglect to leave enough in the bank to cover their obligation and end up doing more damage to their credit score.

A personal loan application is straightforward - typically name, employment information, social security number and income. Even coming into the loan application negotiation with both sides aware you have bad credit and are carrying debt, a bank officer must still review your financial information in order to qualify you before your loan can be approved.

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