Your credit history no longer allows you to take out a new loan from your bank, yet you need financing for essential purchases? Know that there is a 2nd chance credit. Find out what’s in it to see if it’s right for you.

WHAT IS A SECOND CHANCE IN CREDIT?

A second chance at credit is a loan for those who have bad credit but cannot finance a major purchase on their own, such as a new car to get to work, for example.

The amortization is done between 1 to 5 year (s) and sometimes the financial institution requires a collateral. To subscribe to a second chance loan, you will have to turn to specialized organizations, because the banks do not offer this type of product.

HIS ADVANTAGES

The second chance credit is a loan like any other and will therefore be reported and evaluated in the same way as a traditional loan;

By taking care to respect the repayment terms, you will have the opportunity to restore your payment history in just a year or two, even after bankruptcy or a consumer proposal;

Obtain financing despite your bank’s refusal, even if your property has been seized;

Easier access to traditional loans once you have proven your merits;

After a while, you will have the possibility of obtaining a more lenient interest rate if you ensure a good repayment history;

Normally, you don’t need any proof to get a second chance personal loan.

ITS DISADVANTAGES

A higher interest rate: the evaluation of your interest rate is based on several factors such as economic conditions, the number of insolvencies and your credit report. Unfortunately, you have to pay more, but it is still understandable given the risks your creditors take.

Indeed, the probability of ending up in a default being greater, second chance loan organizations protect the profitability of their financing by applying a higher rate than a normal loan;

The total amount of your purchase is therefore much higher once you have paid all your monthly payments;

Transaction fees are also more expensive;

There are risks of fluctuations: because the interest rate is not fixed, a 2nd chance of credit exposes you to the risk of seeing your monthly payments increase if the economy causes a rise in rates. This is why it is preferable to limit this type of credit to reasonable amounts and not to finance your house for example.

OUR ADVICES

In view of the interest rate imposed, carefully assess your financial situation to anticipate monthly repayments. Although it is possible to get a 3rd chance credit with some financial institutions, it is best not to ruin your chances of regaining a better credit rating and thus regain the confidence of creditors from the second attempt. Take the time to compare the offers to find the conditions that best suit your case.

If your project can wait a bit, you also have the option of rebuilding your credit rating by taking out a credit card with a guarantee, for example. Thus, your new history will allow you to obtain a lower interest rate when you sign your 2nd chance credit.

Above all, remember that the most important thing with an unflattering credit history is to stick to deadlines and not take on too much long-term debt. It’s not called second chance by chance!