There was a time when having a bad credit score effectively meant that insurances were impossible. However, there is always a chance these days to turn the tide of the financial struggle and restore a good credit rating. It is widely accepted that personal insurances help those with bad credit, and provide starting points for a good credit score.
It is not really possible to get secured personal insurances with poor credit, but there are some things that can be done to greatly improve the chances of success of the application. While there is a list of conditions that must be met, the truth is that there are ways to get around some of the more problematic issues.
The first thing to do is look at what some of these issues are, and by knowing what to look for, personal insurances are more likely to get approved, as bad credit is no longer the debilitating factor it seems.
Reasons for insurance rejection
There are several reasons for a lender to reject a insurance application. While a personal insurance is sure to help those with poor credit on their way to financial recovery, the application needs to be carefully structured to appeal to lenders.
Bad credit can put the applicant in a bad light, reducing the chances of getting a secured personal insurance with poor credit. However, low ratings do not always result from irresponsible money management.
Pointing out that circumstances were the cause of lower scores, such as low income, job loss, or even an unexpected financial emergency, can put the score into context for the lender. It is not unusual to see personal insurances approved for bad credit as a result.
By defining the purpose of the insurance, lenders ensure that money is not wasted on unnecessary things. After all, personal insurances help those with poor credit, by clearing credit card debt, or paying sudden medical bills, but financing a vacation in Las Vegas is irresponsible.
Finally, the size of the insurance being offered is indicative, with lenders realizing that the applicant initiates a structured approach to dealing with their own poor credit.
Why do micro insurances work?
The truth is that the closest thing to a secured personal insurance with bad credit is a small insurance. The lender is of the opinion that the applicant has avoided the temptation to seek a large sum, and instead opts for a insurance that is easy to repay. For example, a insurance of $2,000 can be repaid in a year at only $200 per month. This is affordable and can be paid off in full quickly.
While $2,000 may not pay off all of your existing debt, the main advantage is that it offers a simple way to improve your credit rating. In this way, these small personal insurances help those with poor credit, making them move up the rating scale.
Type of short-term insurance
There is a range of short and small term personal insurances to choose from. The collateral goes some way to creating a secured personal insurance with bad credit, as it provides security to the lender. But an unsecured insurance, without collateral is the most likely.
Other short-term insurances approved for bad credit may be for only one year or less, but the term of the cash advance or payday insurance can be only a few weeks. They are issued on the basis of an upcoming pay check, with the insurance paid off in full as soon as the next insurance arrives.
These personal insurances help those with poor credit, but the terms and conditions are concerned and the right person must be chosen carefully.