Loans For People With Bad Credit
Is there really such a thing as loans for people with bad credit? Well there is no actual product out there with that specific name but the good news is that some loans are easier to find approval for than others are. In other words, there are no loans explicit to people with a poor credit rating but finding a loan with poor credit is not impossible.
Before rushing into applying for a loan, you first need to ensure that you meet the eligibility criteria. Lenders ask that you are at least 18 years old and live in the UK. You should also have a regular income coming in and have a bank account in your name. You need a debit card attached to the bank account.
Lenders consider a regular income to be any money that is paid into your bank account on a regular basis. This might be from work or it could be from certain types of benefits. This has to be regular benefit and cannot be such as housing benefit. If you are unsure about whether your benefit is classed as a regular income, you should seek advice.
What Types of Loans Are Available?
People with a less than perfect credit rating can apply for the same types of loans that people with good credit ratings apply for. However, it makes sense that if you have a very bad credit rating the lender is not going to be willing to offer many thousands of pounds over several years as easy as they might a smaller loan. Loans that people with poor credit are most likely to approved for are those offering just a small sum of money, which is repaid quickly.
If you have a poor credit rating, and you need a loan, you stand a much better chance of getting approval for the following types of loans:
- A payday loan;
- A short-term loan;
- A guarantor loan;
- Secured loan.
Of course, there is never any guarantee you will be approved and anyone who says otherwise is not being entirely truthful. To begin with, lenders will not offer you a loan without first making sure that it is going to be affordable. Secondly, all UK lenders will make a credit check, however brief that check. Avoid anyone who says they guarantee you a loan before you leave your details.
Why Consider Payday Loans for People with Bad Credit?
The payday loan might just be the most suitable loan for people with adverse credit but you should give it some thought before rushing into borrowing. This is because the loan allows you to borrow just a small sum of money. Most payday loan lenders offer between £100 and £500.
Lenders will usually allow you to spread out the cost of the loan over three paydays if you required. The good side is that the loan can be more affordable, especially if you need to borrow up to the top end, if you spread it over three paydays. However, there is the downside that by spreading it over three paydays you end up paying more in total for the loan. You are going to have to find a fine line for what works out best for you while making sure you can afford to repay the loan on the date or dates you give the lender.
It is important to understand that with payday loans the interest is added daily. All loans have an APR, which is the annual percentage rate. With the payday loan, you are not taking the loan out over the year; you repay it within three months. With this in mind, lenders will usually state how much you have to pay in interest on the amount borrowed over one month. This sum is added onto the loan and the repayments are made on your agreed pay dates.
When considering payday loans and affordability it is important to consider the fact that when your payday comes around you will be short of the sum of money you agreed to pay back. The lenders we work with will check to find out if the loan is affordable based on the money you have going in and what you pay out.
Payday Loans Provide Funds for Emergencies
A payday loan doesn’t offer a huge sum of money, but it is generally more than enough to meet any sudden unexpected financial outgoings that you had not accounted for.
The payday loan is often thought of as an emergency loan. This is because the loan is quick to apply for and if approved it is often possible to get the funds paid into the bank on the same or next day.
Sensible Borrowing Helps to Improve your Credit Rating
People with poor credit ratings stand a good chance of being approved as the amount is small and it shows you are not being greedy. Providing you repay the loan on time, it might even be able to help you improve your credit rating, as it will show up as you have paid off the loan. This means your chances of borrowing will improve and you may be able to get a better deal if you need to borrow again in the future.
Payday Loans Should Not Be Relied On
No loan should be relied on from month to month. It is not a good idea to borrow with a payday loan, repay it back on your next payday, only to find yourself short of money, and have to borrow again. Do not get into a borrowing circle. No ethical lender should permit it to continue by continually offering you a loan.
Short Term Loans Might Be Considered
If you find you need to borrow a sum of money that is more than what payday lenders will offer and you know you cannot repay the loan within three months, a short term loan may be more suitable.
With short term loans, lenders may offer sums of money between £500 and £1,000. This could come in extremely handy in numerous situations and it makes the loan more affordable as you will be able to spread out the cost of the loan for up to one year.
Check the APR on Loans
When considering short term loans for people with bad credit you should look at the APR. The loan is going to accumulate interest and the longer you take the loan over the more interest you will finish up paying. With a bad credit rating, the lender is taking a bigger risk than when lending to someone with a good credit rating, or so the lender thinks. With this in mind you cannot expect to get the lowest APR on loans. Low APRs are reserved for people with excellent ratings. On saying this, the lenders we work with do offer some of the most competitive rates for your circumstances.
While it is possible to spread the repayments for up to 12 months, the loan is going to cost you a great deal more than had you repaid it within 6 months.
If we search for loans for you and match you with several lenders, you should compare the APR as usually the cheapest loan is going to be the one with the lowest rate of interest or APR.
Check the Terms and Conditions
Another thing to take into account is whether the loan comes with any terms and conditions. Most loans do.
For instance, there might be a stipulation to pay an early repayment fee if you pay the loan off early. While you can save on interest by paying the loan off early, if you have to pay an early repayment fee to do so, any savings you might make on interest might be lost.
Guarantor Loans for Very Poor Credit
If your credit rating is extremely poor, your options for loans might be limited. In this case, you might have no option but to consider a guarantor loan.
The guarantor loan is not popular with everyone, but in certain circumstances if there is no other option, it might be worthwhile considering.
You Need Someone Willing to Help You
One of the main reasons many people stay away from guarantor loans when looking for bad credit loans is that they must have someone willing to stand as their guarantor on the loan. This means opening up to a third party, usually a good friend or relative, and admitting you need their help to borrow money.
Of course, if someone stands as guarantor, that person faces having to take over the loan repayments in the event that you should find yourself unable to continue repaying. This means your guarantor is taking a risk on you instead of the lender. If considering a guarantor loan bear in mind that asking someone could affect your relationship as not everyone wants to have someone else’s debt hanging over his or her head. Think very carefully before borrowing this way. As with any other type of loan always work out your finances to make sure the loan is affordable before going ahead and signing up.
Guarantor Loans May Be Suitable For Longer Term Borrowing
Guarantor loans may be a suitable type of loan if you have a very poor credit rating and you want to borrow a larger sum of money and repay over a longer term. With this type of loan, you might even be able to borrow up to £5,000 and spread the cost of repayments for up to 36 months. This is going to depend on the lender and your ability to be able to repay the loan of course.
The Secured Loan
A secured loan may be offered to people with poor credit history but this type of loan needs some serious consideration as you have to secure your property or something of equal value against the amount borrowed.
Apply For Your Loan Online
Applying online for your loan is the easiest and fastest way to borrow. It takes just minutes to make your application and due to the whole process being undertaken online, you get an instant decision. To start your application decide how much you would like to borrow and then how long you want to take the loan over.
You can then leave some important details, which include the amount of regular income you have coming in and what you pay out. This is going to help the lender to determine if the loan is affordable. This is one of the most important factors and lenders consider this more than they do your credit rating when applying for a payday or short term loan.
When you have given us your details, we can search for a loan suitable for you with our panel of lenders. As we work with more than one lender your chances of being approved for a loan increase. What is even better news is that you have to make just one application.
If we match you with a lender or lenders, you can then check out the details of the loan and the repayments to ensure that all is right for you. If you are happy to go ahead with the loan, you can sign up. Depending on how much you want to borrow, and the lender, the funds from the loan might be paid into the bank within hours.
We can help you to search for loans for people with bad credit. The panel of lenders we work with offer numerous loan options along with affordable loans even to people with a poor credit rating. It takes minutes to apply for a loan and you get an instant decision.