Before applying for any type of loan (payday loans, unsecured loans or homeowner loans) or mortgages many people worry about their ability to be approved finance. Many of these worries are completely without reason and need not be a concern.
A typical cause of concern is that someone may have a loan or credit card where they owe a lot of money. Is this bad debt? For many lenders and banks this would not be considered bad debt. It really depends on how the accounts have been conducted – in other words whether there are any payments that have been missed. If there have not then this should not play a large influence on whether you will be declined or rejected. It is worth remembering that if you have a significant amount of debt then a lender may deem that you cannot afford new finance – this always had to be considered.
Another cause of concern is that someone does not have any credit at all – they therefore do not owe anything on any loans or credit cards. Is this considered bad debt? It is true that occasions have occurred where people have been refused store cards or mobile phone contracts because of a lack of credit history. When applying for a loan or mortgage this is less of an issue. However, some people do advise that to get over this issue it might be worth applying for a credit card and simply never using it. Remember though that it is better to have no debt at all than to have debt with missed payments on it.
Some people worry when they have been late on a payment for a loan or credit card. Is this considered bad debt? This is probably one of the most difficult questions to answer as there is no definitive answer. Some lenders and lending institutions will consider a late payment to be a missed payment and some will not. The way to avoid this situation is not to be late – but sometimes this is easier said than done. Direct Debits can of course help in this kind of situation.
A big worry to many, especially people who rent accommodation, is that their property has been black listed. Is this considered bad debt? The term black listed is an old one and is really out of date now. Some credit companies would deem an address to have a bad credit history but of course it is the person borrowing the money – not the building! So if you hear of a property being black listed it is best to ignore it as you will be applying for finance in your own name.
Traditional
unsecured loans are probably ones that will be the most difficult to be approved if you really do have bad debt. A secured homeowner loan or a payday loan could be the easiest. With all types of borrowing, if you do have bad debt they chances are you will need to pay more in interest as you will be seen to be a higher risk to the company lending you the money.