Home renovations often do not comply with your budget, which results in borrowing money from a lender. It is not difficult to have a lender sign off on your application for a home improvement loan if your credit report is up to snuff. Unfortunately, not everyone is lucky enough to maintain a good credit file. Whatever the cause, a poor credit rating is an acknowledgement of your missed payments in the past. It calls your credibility into question, and hence, a lender will be loath to lend you money. Interest rates will be high if they give the nod for bad credit home improvement loans.

Many times, you are told to research the interest rates to get a better deal. Get quotes from multiple lenders and comparison shops. Use an online calculator to know how much you will likely repay. These efforts are not enough to secure a loan at affordable interest rates. Your bad credit score should not get in your way of getting a loan for home refurbishment at lower interest rates. Here is what you can do:

• Make sure your credit score is not very poor

You may find several lenders willing to loan you despite your poor credit report, but before putting in the application, you should check whether your credit score complies with their bare minimum score requirement. No lender will compromise on the eligibility criteria they have set for shortlisting and processing your loan application.

Know your credit score and then ask lenders the lowest score at which they accept applications. Make sure your credit rating is not less than that. If so, do not make the mistake of applying for a loan to that lender. It will result in rejection, and hard inquiries will further pull your credit points, making it even harder to get a loan at affordable interest rates.

• Put down security

Secure your loan against a valuable asset to minimise the risk of a lender. Your lender will repossess your asset to liquidate it to get their money back in case you make a default. Your home will be secured against the loan, so the risk is very high. Make sure you are utterly confident about you repaying capacity. Take account of unexpected events like job loss a big emergency to determine your repaying capacity.

• Borrow a small sum

Lenders might hesitate to lend you a larger sum if your credit score is poor. Borrowing a smaller sum will help you avoid being charged with very high interest rates. Moreover, the chances of approval will also increase. Getting a quote from multiple lenders will let you have an idea of how much they can lend you provided they know your credit rating is not up to par.

• Avoid owing any loan at the time of borrowing

Your lender will check your credit report to know your past payment behaviour. Too old inquiries, missed payments, and defaults will not influence their lending decision, but they may restrict the loan amount and charge high interest rates if you owe any debt.

Current outstanding balance raises doubts on your affordability. Your lender may believe that you are at risk of falling into a deep hole of debt. In fact, small emergency loans in Ireland can make it or break it. You should always try to ensure that you do not owe any balance at the time of applying for a home improvement loan with bad credit rating. Clear your credit card balances as well.

• Arrange a guarantor

To qualify for lower interest rates, you should arrange a guarantor with a good credit history. The guarantor can be your friend, spouse, or any other family member. Before choosing anybody as a guarantor, remember that your default will also lower your credit score.

Arranging a guarantor will help you avail yourself of lower interest rates, as your lender can call on your guarantor to make payments. You should seek to apply for a joint loan as an alternative. You and your spouse will both be co-borrowers. You can obtain lower interest rates if one of you has a good credit history. Both of you will be liable to repay the debt partly and fully.

The final word

Research the market to receive the lowest possible interest rates. Make sure you do not owe any amount at the time of applying for a home improvement loan. Put down security or arrange a guarantor to minimise the risk of a lender. You can choose to apply jointly with your spouse if their credit history is excellent.

However, you should focus on improving your credit report because the damaging effects of a poor credit rating cannot be offset by anything. Borrow money responsibly and never link your account with someone who can default.

Description: You can get a home improvement loan at a lower interest rate despite a bad credit rating if you borrow a small sum, put down collateral, and arrange a guarantor.

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