You might not know it but if you are offered a loan, and you have a bad credit rating you are not going to be offered the lowest interest rates. This is generally to reflect the fact that lenders see you as being a bigger risk than someone with a good credit rating is. So is there such a thing as cheap loans for bad credit?
Many factors determine how cheap a loan is going to be and they include:
- Your credit rating;
- How much you borrow;
- How long you spread the loan over;
- The type of loan you take out. Some have higher rates of interest than others;
- Whom you apply to for your loan.
What Is A Cheap Loan?
First, let us determine what a cheap loan is. Is it a loan with the lowest monthly repayments or the cheapest loan overall?
Keeping the Monthly Repayment Down on a Loan
If you are talking about the cheapest monthly repayment on a loan one of the main factors is the length of the loan.
Spreading a personal or guarantor loan out over a longer period leads to lower monthly repayments. This can make a loan more affordable each month, but in the end, the loan is going to cost you more in total with the interest added on.
Keeping the Total Cost of Borrowing Down
If you are talking about a cheap loan, and keeping the total cost of borrowing down, you should consider the length of the loan, along with how much you borrow.
You will save money the quicker you pay off a loan as you will be paying less interest. How much you borrow will also account for how much the loan costs in total. A loan of £500 is going to cost less in total, with interest added, than a loan of £1,000. With this in mind, never be tempted to borrow more than you really need.
The type of loan you apply for is also going to factor in to how much you pay for the loan. Borrowing smaller sums of money and repaying it quickly will not cost you as much in total as borrowing thousands and spreading the repayments over many years.
Your Credit Rating
Your actual credit rating is also going to factor in to how cheap the loan is going to be. If your credit rating is very poor, you will pay a higher rate of interest than someone with a good credit rating will. There is no getting away from this fact.
Essentially, there is no quick answer to the question of is there such a thing as cheap loans for bad credit as it depends on several factors.
Three Types of Cheap Loans for Bad Credit to Consider
There are many types of loans out there but some are perhaps more suited to people with bad credit than other are. With this in mind, when we talk about cheap loans we are going to concentrate on loans more suited to people with poor credit ratings. These are:
- Payday loans;
- Short-term loans;
- Guarantor loans.
Borrowing £100 to £500 Repaying in 1 to 3 Months
Payday loans have been called an expensive way to borrow money but this depends on how you look at it and how you manage the loan.
Payday loans are no more expensive than other types of loans providing you repay the loan as agreed and in full.
With a payday loan, you can borrow between £100 and £500 and repay the loan between one and three months on your paydays.
If you were considering the cheapest way to borrow with a payday loan, it would be to borrow what you know you can reasonably afford to repay and pay off the loan in one payday. The loan might be more affordable if you spread the cost over three paydays, but it will cost you more in total with interest added on. Interest is added onto payday loans daily, so the least amount of time you take to repay it, the less it will cost you in total.
Borrow £500 to £1,000 Repay For Up to 12 Months
With a short-term loan, you can borrow in the region of £500 to £1,000 and spread the loan out for up to 12 months.
As you can imagine the more money borrowed, the higher the cost of the loan with interest added on. The same applies to the length of the loan. Spreading it over a longer period can make the monthly repayments cheaper; however, you will pay more in total for the loan.
Again, only borrow what you know you can afford and take the loan out over the shortest period possible to keep the total cost of the loan down.
Borrow Up to £5,000 Repay Over 36 Months
If you need to borrow up to £5,000, you might be able to spread out the repayments for up to 36 months with a guarantor or personal loan.
If your credit rating is very bad, a guarantor loan might be easier to find approval for than a personal loan.
One word of warning, guarantor loans usually come with high rates of interest, based on the fact you are seen as being a bigger risk to the lender.
Where You Apply For a Loan
Where you apply for a loan is also going to make a difference, as finding the best interest rates is essential to keep down the cost of a loan. If you want to get the best interest rates possible for your circumstances, you might want to consider applying for your loan with our help.
We work with a huge panel of lenders based in the UK who will consider verifiable income, so even if your credit rating is poor you might still be able to get a loan.
Lenders we work alongside offer the most competitive rates of interest based on your personal circumstances. They also offer a range of affordable loans and loan options. Therefore, if you want cheap loans for bad credit make your online application with our help.
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