Single parents are more likely to need finance than married couples who count on two incomes. Unfortunately they are also less likely to be approved for regular unsecured personal loans mainly because financial hardship tends to cause bad credit which scares lenders away. However, there are certain lenders willing to approve loans regardless of bad credit that can tailor a loan with flexible terms for single parents.
The Usual But Not Suggested Solutions
People who run into debt problems or credit problems and need urgent finance, tend to use some financial products that are not meant for solving these problems. Transferring the balance on your credit card is a good example of this. Balance transfers are designed for product migration not for emergency financing. Thus, even if a promotional period is offered, the terms on the outstanding debt once the promotional term ends will not be so advantageous.
Another common alternative is consolidation by means of a home equity loan. Though it is easier to qualify for a secured loan, if you have a low credit score, the terms on the consolidation loan or home equity loan will not be so advantageous and, moreover, your debt now will be secured which means that you can loose your property to forbearance if you fail to make the monthly payments.
Bad Credit Loans Conditions For Single Parents
What is the main issue for single parents when it comes to loans? Income! While couples can add both incomes to qualify for loan approval, a single parent is on his or her own. Therefore the main issue that represents an obstacle for loan approval on regular loans are the added limitations to bad credit: a single income and higher expenses. The solution? To design a loan with affordable payments with little impact on a single limited income.
Thus, these loans are tailored specially for single parents. In order to obtain the desired effect (low and affordable monthly installments), the lender will extend the repayment schedule which will determine the resulting minor and easy to afford loan installments. But that is more than often not enough because the borrower will run into usual cash emergencies and might fail to meet a payment or two. That is the reason why lenders add to these loans the ability to interrupt repayment for a limited period of time. Of course, interests keep generating but the next payment can be agreed to be settled up to three months later.
Flexible Refinance Solutions
As an additional feature, these loans can be refinanced at the borrowers request if at any point in the repayment schedule the payments become too onerous for the borrower to afford. As you can see, it is all oriented to keep the borrower up to date with the payments so his or her credit remains unaffected and improves over time as the monthly installments keep getting recorded into the credit history.
These refinancing options tend to protect the loan repayment from default to aid in the credit recover process. As usual everything comes at a cost and though the monthly payments may be reduced by refinancing, a rate increment may be triggered and the repayment schedule will be extended.