There is no loan specifically aimed at people with poor credit ratings but some loans are usually easier to find approval for than other are. Small loans fall under this category as they offer just a small sum of money. If you are looking for small loans for bad credit, you will be pleased to hear that there are a few options open to you. While there is no guarantee, you will get approval for a loan if you have a bad credit rating, a small one is your best option. So what are the options open to you?
The types of loans that you might be more likely to be approved for with a bad credit rating include:
- A payday loan;
- A short term loan;
- A guarantor loan.
The type of loan that might be the most suited to your needs will be dependent on the amount of money that you need to borrow, and how long you want to take the loan over. It will also depend on just how bad your credit rating is.
All lenders in the UK will want to check your credit rating, however, if you are only applying for a small loan they may not dig too deeply into your credit file. Some lenders may only perform a soft credit check as opposed to a hard one.
Different Options for Loans
Loans offer different amounts of money and can be spread out over different terms. The term of the loan is how long you are going to take to pay the loan.
Two of the most frequently applied for loans are the payday and short-term loans. Both loans only offer a small sum of money. If your credit is too bad and you want to borrow a larger amount of money, you might have to consider a guarantor loan.
All loans that we talk about here can be applied for online and usually, the whole process is undertaken online. This means that getting hold of money fast when you most need is possible. In some cases, you might be able to get the funds from the loan transferred into your bank account on the same day you applied for the loan.
What about Loan Criteria?
All loans in the UK have some criteria attached to them and you should make sure you check this before going ahead and applying, as it will save you some time.
To apply for a loan with the panel of lenders that we work alongside you will have to:
- Be over 18 at the time of applying;
- Have a regular income per month;
- Hold a UK bank account in your name;
- Have a debit card attached to the bank account;
- Have a bank account that can have direct debits set up.
When most lenders stipulate that you need to have a regular income, this does not mean the income has to be from work. You can apply for a loan if you are on some benefits. If in doubt about whether your benefit is classed as a regular income check with the lender.
Why Choose a Payday Loan?
You might be wondering if a payday loan is a suitable choice of loan for you. This loan allows you to borrow between £100 and up to £500. This can be a good choice of loan to apply for if you are met with a sudden financial emergency. For instance:
- A large bill has come in and it is a final reminder which means it needs paying fast and your payday is still a long time away;
- Your vehicle develops a fault or breaks down and you have to take it to a garage to be repaired;
- Perhaps an appliance you cannot manage without breaks down or you have to replace it and your payday is a long way off;
- You might have overspent when out shopping and find out you are now in an unauthorized overdraft.
In any of the above circumstances, you might be able to borrow up to £500 and when payday comes around you can clear the loan. Of course, there are many more reasons and situations where a payday loan may be a suitable type of loan.
Most lenders are somewhat flexible in regards to payday loans and they will allow you to spread out the loan over up to three paydays. This means you are taking out a loan that is to be repaid over three months.
While this does give some breathing space, bear in mind that the longer you take the loan over the more it is going to cost in total. Interest is added onto the payday loan daily, so don’t pay too much attention to the APR, as this is the rate of interest that would apply if you were paying over the year. The APR on payday loans is usually shown as being in thousands of percent and this makes it look like it is an expensive way of borrowing.
However, if you were to find yourself unable to clear the loan off as agreed, it can indeed become an expensive way to borrow so always ensure that you are going to be able to afford the repayments. With this in mind, you need to do your calculations correctly so as not to leave yourself without any money when your payday comes around.
What is the Short-term Loan?
A short-term loan may allow you to borrow between £500 and up to £1,000. This is going to depend on the lender and whether they think the loan is affordable. Lenders will also consider your credit rating as all lenders do in the UK.
All ethical lenders will want to make sure that any small loans for bad credit they offer are going to be affordable to you. With this in mind, they will want details of your income and outgoings each month. Providing there is ample money left over, there is no reason why you should not be approved for the loan.
A short-term loan might be considered if you require a larger sum than what a payday loan offers and you want to be able to spread the cost of repayments over a longer period. Lenders will usually allow you to spread out the repayments for up to one year. This may depend on the lender with some perhaps offering a longer repayment period.
When considering applying for a short-term loan you are going to have to take note of the APR on the loan. This is given as a percentage, with that percentage being added onto the loan in interest. Usually, a loan with the least APR works out cheaper but you also have to factor in any additional costs such as fees.
Always make sure you know the total cost of any loan you are considering before you go ahead and sign for the loan.
Can I Get a Guarantor Loan?
If your credit rating is particularly poor, you might want to consider applying for a guarantor loan. People with poor credit ratings do stand more chance of being approved for a loan of this type but still, there is no guarantee.
The guarantor loan means that you are going to have to ask someone to be a guarantor. This means that they are willing to take over the loan repayments if you were to find yourself unable to maintain them. It is important that the guarantor understands what is required of them and the lender makes it clear in the paperwork.
When taking out a guarantor loan both you and the person standing as a guarantor have to meet the same eligibility requirements as you and they should have a good credit rating.
The downside to the loan is that it does mean you have to speak openly to someone close to you about the fact that you are having money troubles and cannot get a loan without their help. This can cause some ill feeling as often people do not really want to stand guarantor and risk their good credit rating but they are your friend or relative so they feel awkward in telling you so. This can also be the case if you were to default on the loan and the repayments fell onto them.
Of course, some people do not have someone close enough to them that they feel comfortable in asking and this type of loan is not for them.
How to Apply For Small Loans for Bad Credit
There are two ways of applying for loans. You could go down the road of searching for the loan for yourself. If you have a bad credit rating and need to get hold of money quickly, this is not something that we recommend. This is because finding a lender who can offer you a loan for your circumstances may take a long time.
There are many false promises made online and often when you go through the application process, you get to the end only to find you are not suitable and the lender cannot offer you the loan.
On the other hand, you can allow us to search for a loan on your behalf. We do not offer loans ourselves, instead, we work along with a panel of lenders in the UK. The lenders we work with offer come of the most competitive rates and affordable loans.
All you have to do to take advantage of this is to give us a few details and choose how much you want to borrow and how long you want to borrow over. We can then look with our lenders to try to match you up.
If we can match you up with a lender, you can take your time to go over the details of the loan to ensure that it is right for you.
When checking out the loan ensure that you look at:
- How much the loan is going to cost you in total;
- The amount of interest added onto the loan;
- How much the loan repayments are each month;
- The date or dates of the repayments of the loan;
- Whether there are any fees attached to the loan.
If you are happy with the terms and conditions of the loan, you can go ahead and complete the sign up process with the lender. Depending on the amount of money, you asked to borrow you might be able to get the funds transferred into your bank account on the same day.
There are many options for small loans for bad credit including payday loans, short term, and guarantor loans. We work with lenders offering the most competitive interest rates on loans of all types and numerous loan options. Tell us how much you would like to borrow and how long you want to take the loan over and we can help to match you up with a lender from a large panel of UK lenders.