If you only need to borrow a small sum of money, say up to £500 and you can repay it back quickly you will not have many issues getting a loan. However, there may be times when you need to get hold of a larger sum of money and want to spread the cost back over many months. So, is it possible to get long term loans for bad credit?
What Is A Long Term Loan?
Different lenders might have different opinions over what is classed as a long term loan. Generally, a loan might be thought of as a long term if you want to spread the cost of the repayments over more than one year.
We work with a panel of lenders who offer loans of up to £5,000, which you can spread out over up to 36 months. This gives you ample time to repay the money with monthly affordable repayments.
If you do not have to borrow this much, you might be better suited to a short-term loan or a payday loan. With the short-term loan, you can generally borrow up to £1,000 and the payday loan up to £500. These types of loans are not good if you want to spread the repayments as the payday loan is repaid within three months and the short-term within a year.
Long term loans may be offered by way of:
- Unsecured personal loans;
- Secured loans;
- Guarantor loans.
The most suitable type of loan would depend largely on your credit rating, the amount you wanted to borrow and the lender.
Unsecured Personal Loans
If your credit rating is very bad, the chances of your being approved for an unsecured personal loan are slim, but it does depend on the lender and how much you want to borrow. Some lenders are more lenient with others and all the lenders we work with do consider current circumstances, along with your credit rating.
As you do not have to secure anything against the loan, your home is not at risk if you fail to make the repayments on the loan. However, late repayments or missed repayments would have negative consequences for your credit file.
If you have a very poor credit rating, you might be offered a secured loan. This type of loan comes with more risk to the borrower as they are asked to secure their property against the amount borrowed. This type of loan is usually offered if the amount requested is in the many thousands of pounds.
The lender is not taking such a big risk as if you do not repay the loan they can take you to court and seek possession of your home to sell to claim back the money. With this in mind, a great deal of thought needs to be given before taking out a secured loan and you might want to consider all other options first.
Thought also has to be given to the fact that circumstances can change. Even if you can afford the loan now, something could happen in the future that might mean the loan is no longer affordable.
Guarantor loans are a popular type of long term loan for anyone who has a bad credit rating.
With this type of loan, the lender asks that you find someone to stand as guarantor. A guarantor is a reliable person over the age of 18 who meets all the criteria for taking a loan out in the UK and who has a good credit rating. This is usually a very good friend or a relative. It means that the person you ask would be financially accountable for the repayments of the loan in the event that you fail to meet them. In short, they would have to pay back the loan.
Factors to Consider When Looking For Long Term Loans for Bad Credit
When looking for long term loans there are some factors that you need to take into account as these will affect how much you have to repay in total. You need to consider such as:
- The APR on the loan;
- Whether there are any fees added on to the loan;
- Whether the loan is the most suitable for you;
- You have read the terms and conditions of the loan and understand them;
- You know exactly how much the loan will cost you each month and the date of the repayments will be taken from your bank account.
How Much Is the APR?
The APR is the annual percentage rate. It is the amount of interest added to the amount of money you borrow, and the interest charged annually.
When taking out a loan the interest rate will be either fixed or variable. With the fixed rate of interest, you would know exactly how much you would pay each month over the term of the loan. This makes calculating the repayments of the loan easy and allows you to budget for the loan over the long term.
If the interest rate is variable or flexible, it means that the rate if interest would vary. If the Bank of England base rate goes up, the amount of interest you pay goes up. This means that if you take the loan out over many years and the interest rate goes up, you end up paying a lot more than you first anticipated. This is not good if you need to budget for the loan.
It is also important to bear in mind that the Bank of England base rate only influences the interest rates that lenders charge when you borrow money; it is not the amount of interest that you pay on a loan.
If a loan came with an interest rate of 35% and the base rate when up by 0.5% the 0.5% change would reflect on the flexible rate of interest on a loan, making the interest 0.5% dearer than what a person was paying before the rise. The new rate of interest on the loan would be 35.5%.
If money is tight and you are considering a loan, make sure the APR is a fixed rate and this way you will not get any nasty surprises during the term of the loan.
Be Aware of Added Fees
You also have to be aware of any fees that might be added onto the cost of the loan, as these will be calculated into the repayments.
One fee that often comes with personal loans is an early repayment fee. This means that if you take the loan over five years but are able to repay the loan off in three years, you would have to pay an early repayment fee.
Is the Loan The Most Suitable For Your Circumstances?
As mentioned above there are different loans for different circumstances and you should make sure that the loan you choose is the right one for your needs. If you can manage by borrowing only a relatively small sum of money, and you could repay it back within a year, a long term loan might not be the most option.
All Loans Come With Terms and Conditions
All loans will come with terms and conditions. These are set out by the lender and can vary between lenders. Before signing for any loan make sure you are aware of the lender’s terms and conditions.
Make Sure You Know How Much the Loan Will Cost
Always make sure you know how much the loan is going to cost you in total. This includes the amount borrowed, the amount of interest added onto the loan and any fees added.
You should make sure that the loans monthly repayments are affordable but at the same time don’t spread the cost of the loan out over too many years as this means you pay more interest. Find the line between affordability and lowest term.
Always make sure that you know when the loan repayments are going to be taken. Make a note of the date and make sure that this is after your monthly income goes into the bank.
Eligibility for All Types of Loans
With any type of loan, there are certain terms and conditions that have to be met before you can apply for a loan in the UK.
You do need to be at least 18 years of age and have a regular income coming into the household. The lender will consider your income along with what you have to pay out each month. Ethical lenders do this to make sure that you can afford the loan. Income does not just mean from a job. It can mean regular benefits paid into a bank account.
You also have to live in the UK, have a UK bank account and debit card and the account should be able to have direct debits set up for the repayments.
Making an Application for a Loan
Making an application for a loan online is quick and easy. We are not lenders, instead, we work with a panel of lenders to match you up with a suitable lender for the loan you need.
It takes just minutes to give us the information needed for us to search with a panel of lenders offering numerous loan options.
Within minutes, you will know if your loan application has been approved and you could have money paid directly into your bank account within days.
The lenders we work with will give your credit check a quick look, take your circumstances now into account, and decide if they think the loan is affordable. If so, they will offer you a loan and you can check the details of it along with any terms and conditions and then go ahead and sign up for that loan with the lender.
One of the main advantages of finding a loan with our help is that you only have to make one loan application to be able to search for a loan with a panel of lenders. This improves your chances of being approved for a loan. It saves time as you only have to fill in your details once and you will not have numerous queries for loans applied to your credit file.
Long term loans for bad credit are just a few clicks away. As we only work with ethical lenders who offer the most competitive rates and affordable loans, you have peace of mind that you have found the most suitable loan for your needs.