Whether it was reckless spending that soon taught us a lesson, mismanagement of our repayments or a genuine inability to pay back what we had borrowed, at some point in our lives many of us will find ourselves with a poor credit rating.
This however does not necessarily mean we can simply afford to forego borrowing any more money, nor that we would not be able to better manage a loan now and though getting a lender to agree to a deal might not be so easy, there are a number of things you can do to increase your likelihood of getting hold of the cash you need.
Applying to one bank and then giving up upon rejection will get you nowhere. With a poor credit rating, you are immediately a candidate for refusal and should enter into talks expecting the worst while hoping for the best.
Rejection from one institution does not mean that nowhere will accept your application; time and patience will be required.
Negotiate interest rates
While you still want to get the best interest rate you can possibly get a lender to agree to, you have to understand that the compromise for being accepted with a bad credit history is paying higher interest rates.
Seeing you as a risky investment means that banks will want a bigger return on their money and as much as it might sting, you have to be willing to accept this if you want the loan application to be approved.
Be wary of Payday loans
While you are more likely to be accepted for a payday loan, you are also more likely to find yourself in deeper financial trouble if you accept one.
These short-term loans for small amounts of money are designed to tide you over between pay cheques but they come with huge interest rates and massive penalties should you not pay it off on time.
So many consumers have found themselves crippled by such loans that there are even investigations underway as to how unfair they may truly be.
Keep it to a minimum
The more you ask for, the more likely a lender is to decline you if you have a bad credit history. Carefully working out the minimum amount you need to borrow and being sure to decline any extras such as Payment Protection Insurance that would boost payments and the investment will seem less risky to the lender, encouraging them to say yes.
Improve your rating
Perhaps the best way to increase your chance of a successful loan application is to actually improve your rating, repair your credit score fast thus making you seem like a safer investment.
Paying off all other outstanding debts by being punctual and organised with repayments will soon help towards this. Another good tip is to lock away your credit card and try not to use it; as this way you will never exceed your limit or fall behind on payments, allowing your rating to gradually improve without actually doing anything.
Banks may be the traditional source of money but other options are available. Borrowing from family and friends is a great way to get better interest rates and a more lenient repayment schedule.
Just be sure to write up formal documentation outlining any agreement; the last thing you want is to lose loved ones over squabbles with money if things go wrong.