Loans For Poor Credit
Loans for poor credit, is there really such a thing out there? This is one question millions of people in the UK wonder. There is no product on the market with that specific name, but there are loans aimed at those with a poor credit rating.
People can get into financial difficulty and obtain a poor credit rating often through no fault of their own. Whatever the reason for obtaining a poor credit score, you will struggle in the future to get any type of credit.
What Are Loans for Poor Credit?
As referred to above there is no such loan specifically with the name of “loans for poor credit UK”. Loans are loans, be they secured loans, unsecured loans, payday loans, short-term loans or guarantor loans.
However, there are some loans more suitable for those with a poor credit rating.
What Does Bad Credit Even Mean?
First, let’s look at the term “bad credit”. What does this actually mean? Financial institutions generally use the term when a person has a less than perfect credit rating.
Some loan providers might class a person as having bad credit because they missed a couple of loan repayments. Another might be more lenient. Some lenders even blacklist people who fell behind on payments making it impossible for that person to get credit from them again.
All lenders give a person a number in relation to their credit score. Yes, to lenders people are numbers, not people. You might have earned a bad credit score through no fault of your own. This does not matter to the majority of lenders. A bad credit score is a bad credit score, the end.
To make matters even more confusing in relation to a credit score, different lenders have different rating scales. What one lender may think is a bad credit score another might not. It’s confusing.
Factors that go towards determining a credit score include:
- Late credit repayments in the past;
- Falling behind on Utility bills;
- Falling behind on phone bills, including monthly contracts;
- Failing to repay loans;
- CCJs against you;
- Victim of identity theft.
Thankfully, here at Bonsai Finance, we understand your predicament. We do not provide loans ourselves but work with lenders who do. We work with lenders who are more inclined than others to offer loans to people with a poor credit history. The lenders we work with focus more on your ability to repay now, not your past. We can match you up with a lender, saving you time and stress.
Even Applying for a Loan Can Affect Your Credit Rating
Did you know that even applying for credit, be it a loan or credit card, can have a negative impact on your credit rating? This applies to whether you are approved for the loan or not.
Keep applying for loans and keep being turned down and you are only hurting your credit rating even more.
Wouldn’t it be nice if you could browse and compare loans all from one place and with a higher chance of being approved? While we cannot guarantee approval, we can provide access to lenders offering numerous loan options and competitive rates even for those with a poor credit history.
So if there is no definite loan with the title of poor credit loan, what loans are out there if you have a poor credit rating?
The Different Types of Loans for People with Poor Credit
There are different types of loans available for people with poor credit and the most suitable choice may depend on your circumstances, what you want the money for and how much you want to borrow.
The Secured Loan
The secured loan may be the type of loan most offered to people with a bad credit rating. In short, this loan requires something of substantial value to be put down as collateral on the money borrowed, generally property.
The secured loan is usually offered to people who wish to borrow thousands of pounds and payback over many years.
The secured loan generally comes with a lower APR than an unsecured loan. However, as it is taken out over a long term, more interest is paid back.
One of the main downsides to the secured loan is that if you fail to make repayments of the loan whatever you put down as collateral against the amount borrowed is at risk.
You might give consideration to a secured loan if you need access to a large sum of money for any reason. Of course, sensible borrowing is essential. Always consider whether you can do without whatever it is you are borrowing money to pay for or if it is essential.
The Unsecured Loan
An unsecured loan can be taken out without any collateral. However, lenders do not usually offer loans in the thousands of pounds. This type of loan is usually repaid in a couple of years and it generally has a higher rate of interest than the secured.
It can pay to compare the APR of lenders when looking for an unsecured loan as some offer better deals than others do. Again, bear in mind that the longer you take out the loan the more interest you will pay. Even a 1% difference in the APR you pay back can add up over the years.
The Short-term Loan
Lenders have started to offer what is termed short-term loans. Some lenders call them payday loans or quick loans.
Short-term loans are not appropriate for anyone who wishes to borrow hundreds or thousands of pounds. Lenders typically offer anything from £100 to £1000 with a short-term loan. The loan is generally paid back on the next payday or the one after. This means the loan is usually offered for one or two months. However, with some lenders, it is possible to take out a short-term loan for many months.
Loans of this nature are apt if you have poor credit and you are sure you can repay the loan within the period stated when borrowing. Loans of this type are suitable if you need to get your hands on money fast, to pay for things such as repairs or bills that have been forgotten about, and which cannot wait until the next payday.
Short-term loans may even help to improve credit ratings, providing you borrow sensibly and repay the full amount on time. Short-term or payday loans come with a rate of interest that looks extremely high. It is not unusual for them to have 1294.1% APR. However, it is important to bear in mind that the loan is usually repaid in days or months, not years. Even so, the amount of interest added on to the short-term loan is usually a great deal more than with other types of loans. If you were to find yourself unable to repay the loan, the money owed could soon mount up.
Short-term loans are generally the quickest loans to apply for and receive the money in the bank. This makes them ideal for emergencies when there is a short-term financial shortfall.
The Guarantor Loan
The guarantor loan can be taken out if you have someone who is prepared to stand as your guarantor.
This means a friend or a member of the family agrees to repay the loan if you falter on it. These loans can affect friendships and relationships with family members if something unforeseen occurs that means you cannot repay the loan. Even asking a friend or family member to stand as a guarantor can ruin relationships and friendship and cause tension. In the event of your failing to repay the loan and them having to take it over, it could mean the end of the relationship or friendship.
How Loans for Poor Credit UK Work
If you have a poor credit rating and are looking for loans for poor credit UK you will be wondering how easy it is to apply for one and how it works.
The application for a loan through us is made online. Best of all it takes just minutes to complete the application process. We will run the application by our network of lenders in order to match you with one of the qualified lenders we work with.
If all goes well and you are accepted by one of the lenders we work with you are then taken to the webpage of that lender to complete the process. The loan is signed up for electronically, so no waiting around for the post.
During the application we will ask you for some details. These include your bank account details. If you are accepted for the loan, the money may be deposited into your bank account by the next day. Of course, this depends on the lender and your own bank.
Anyone applying for loans for poor credit will have to meet some eligibility criteria. This will differ between lenders but overall the criterion includes:
- Being over the age of 18;
- You are a resident of the UK;
- Have a bank account;
- Be able to set up direct debits through your bank account;
- Have a regular income coming in.
The Advantages and Disadvantages of Loans for Poor Credit
All loans come with advantages and disadvantages, perhaps more so if you have bad credit.
The Advantage of Taking a Step up Onto the Lending Ladder
One of the main strengths of being approved for loans for bad credit is that you have access to credit again. Getting back on the credit ladder is a huge step in the right direction of proving you are reliable and trustworthy. Of course, this is going to depend on whether you make the repayments on time and pay off the loan in full. By taking out a loan and repaying it without any issues, you prove yourself trustworthy and slowly your credit rating will improve over time.
If you pay off the loan fully and on time you may find it easier to obtain approval for credit the next time you apply and be offered a lower rate of interest.
Alternatively getting approval could work out at a disadvantage if you find that you cannot repay the loan as this is going to add to your credit rating woes.
Another disadvantage to getting loans for poor credit is the interest rate. Generally, lenders offer people with bad credit loans that come with higher APR than those offered to someone with a good credit rating. Bear in mind the longer period of time you take a loan over, the more interest you are going to pay.
There are advantages and disadvantages to applying for poor credit loans but it may be your only option if:
- You do not have enough time to wait for your credit rating to improve. It can take years for a credit rating to improve and this may be time you don’t have if you need access to money fast;
- You do not wish to risk any ill feelings between friends or family by asking them to stand as a guarantor for you.
We Can Help You Secure the Most Suitable Loan
Whatever reason brought you here looking for information about loans for poor credit UK we can help to match up with the right lender. Bonsai Finance is an expert in the field of personal finance, specializing in linking people with a poor credit rating to lenders willing to offer loans.
If you are ready to apply for loans for poor credit, whatever your credit score, let us help you. Apply for your loan online today through us, it is quick and easy and if approved you could have the money in your bank in just a couple of days.