All You Need to Know About Financial Hardship Loans

Financial hardship loans are unsecured personal loans that have recently gained popularity. These are like any other personal loan; you can apply for one if you ever find yourself in a tight spot.

Some financial institutions are willing to work with borrowers who need financial hardship loans with bad credit in Australia. And if you are out of a job, you can still access financial hardship loans for the unemployed.

In this article, let’s take a look at how you can secure a financial hardship loan and everything else you need to know about it.

What this article covers:

Where Can You Get Loans for Financial Hardship

If you’re struggling to make ends meet, a loan can provide relief for bills, groceries, rent, and utilities. But remember, only borrow what you need since most of these loans have shorter repayment terms, so look for one that suits your repayment plan. 

financial hardship loans

There are two options you can explore:

Banks

Getting a loan from a bank or credit union could be a hassle if you have bad credit, are currently unemployed, or both. However, applying there could speed up the approval process if you already have an established relationship with your bank or credit union. Inquire about hardship loans from your bank or credit union’s loan officer.

Online Lenders

Applying for a loan quickly and easily online is particularly useful when it’s difficult or impossible to travel to a physical place, and online lenders help with this exactly. In addition, many online loan providers provide more forgiving terms of repayment, such as extended loan durations, smaller monthly instalments, and reduced interest rates. 

Types of Financial Hardship Loans in Australia

There are several loans to choose from, each with pros and cons. To select the most suitable for your needs, it is important to have a firm grasp of how they function.

Poor Credit Loan

Certain financial institutions will extend personal loans to borrowers with poor credit ratings. With the FICO scoring formula, a score below 580 is considered bad, while a score between 580 and 669 is considered fair.

Bad credit loan providers are aware that their clients are more likely to default on their payments. If you apply for a loan and get approved despite having terrible credit, the interest rate will be greater to compensate the lender for taking on more risk. 

When applying for a loan, it might help to have a cosigner who also has good credit can help you get approved and get better rates.

financial hardship loan

COVID-19 Relief Loans

The COVID-19 relief loan program aims to assist people and companies that have been adversely affected by the pandemic. 

Borrowers may find relief from their financial difficulties by taking advantage of the loans’ potential for lower interest rates, extended payback periods, and other perks. Online lenders, government institutions, and charitable groups are common sources for these types of loans.

Joint Personal Loans

Joint personal loans can be an option for borrowers with poor credit who also have access to a cosigner with better credit. With a co-borrower on your loan application, you can get a personal loan with a cheaper interest rate and better terms.

When two people sign a personal loan together, they are legally accountable for repaying the amount. However, defaulting on a shared loan will affect both borrowers, so locating someone you can trust to make payments with you is essential.

Consider personal loans with a cosigner if you have a creditworthy person prepared to help you qualify for a loan but not directly and immediately return it. But remember that if you don’t pay your bills, your cosigner will be held legally accountable for repayment.

loans for financial hardship

Steps to Take When Applying for a Hardship Loan

After you have figured out where and which loan you want to secure, you can go ahead and follow these steps:

  • Verify your credit rating: A person’s ability to make timely debt payments might be inferred from their credit score and report. Yet, if your credit or income has taken a hit due to the present crisis, you may find that lenders specialising in these loans are ready to consider your banking history.
  • Get prequalification from various lenders: Although not all lenders would let you prequalify for a personal loan, the best ones will. In this approach, you won’t have to worry about damaging your credit just to check your qualifications or get rate quotes.
  • Examine all of your financing options carefully: If you’re hunting around for a loan, it’s often helpful to have many quotations from different lenders to consider. The annual percentage rate (APR) is important, but you should consider other factors to be sure the loan will meet your needs.
  • Submit a formal application to your chosen lender: Selecting a lender involves providing personal information and consenting to a hard credit inquiry, which can have a short-term negative impact on your credit score. You should strive to keep the approval extended to you throughout the prequalification phase.
  • Append your signature: A couple more signatures, and you’ll get your money and can start making payments. Make sure you plan how to pay your loan on time each month so that you can use the money to get out of your financial jam and improve your credit score.

Conclusion

It can be challenging when you are in a bind and need more cash. You may need a loan for a car or to cater for your kids and are looking for hardship loans for single mothers in Australia; whatever the emergency, financial hardship loans are just what you need. 

Take another read at this article, tick all the boxes, and do your due diligence in researching the best lenders, such as Orange Loans, to secure the loan you need.

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