If you have a poor credit rating and you need a loan you may be wondering what your options are. Sure, there is the guarantor loan but you might not want to bring a third party into it or you might not have anyone you can ask. Here we look at loans for bad credit no guarantor to show you the options open to you.
Why Lenders Shy Away From Offering Loans to Those with Bad Credit
If you have a good credit rating, lenders will fall over themselves to offer you a loan with an attractive rate of interest and a good deal. However, if your credit rating is poor many lenders will run a mile if you request a loan. But why is this?
Lenders always look at your credit file when you request a loan. There is no getting around this fact in the UK. Your credit file tells them how big a risk you are as it holds your past borrowing records. If you were late with repayments, missed repayments or have CCJs against you, your credit rating will be lower than someone is who paid on time and cleared their past loans. The lower the credit score, the bigger the risk you are seen to the lender.
This does not mean that you cannot get a loan and the lenders we work with look into your credit file but at the same time consider your current circumstances. So what types of loans might be available and how likely are you to be approved for them?
Types of Loans for Bad Credit No Guarantor
There are different types of loans that do not need you to ask a guarantor to stand by your side when applying for the loan. The most suitable to apply for will depend on your reasons for borrowing, how much money you require and the term you want to take the loan over.
Loans that you might want to look into include:
- Personal unsecured loans – usually offer a sum of money between £1,000 and up to £5,000 repaid for up to 36 months;
- Short-term loans – usually offer money between £500 to £1,000 and are paid back within a year;
- Payday loans – usually offer between £100 and up to £500 and paid back within one to three months.
All of the above loans can be applied for without the need for a guarantor; however, it would depend on your credit rating and the lender as to whether you are approved. Generally, the lower the sum of money borrowed and the smaller the term of the loan, the more probable you are to be approved if you have a poor credit rating.
How Does The Personal Loan Work?
The personal loan is the least likely loan to be approved for if you have a bad credit rating as it is generally taken out over the longest term while offering the most money. This does not mean that you cannot get approval, as this would depend on whether the lender thinks you are able to repay the loan.
If you get approval for a personal loan you would spread the cost of the amount borrowed over the term of the loan, this is the length of the loan, for example, 36 months. The total amount you would repay would include the interest that accumulated over the term of the loan and any fees associated with the loan. A fixed rate of interest is better than a variable rate as the monthly repayments would remain the same each month.
This sum is spread out over the term so you know exactly how much you would pay each month. The monthly repayments would be taken by direct debit from the bank account you signed up with when applying for the loan. This type of loan can be taken out to cover virtually any financial outlay.
How Does the Short-term Loan Work
The short-term loan works exactly like the personal loan with the main difference being the amount you borrow is smaller than with the personal loan and the loan is repaid within one year.
As the loan is repaid within a year, you do not pay as much interest as you would if you spread the loan out over many years. The interest rate on the short-term loan may be slightly higher than with a personal loan. This type of loan may be ideal if you want to borrow up to £1,000.
How Does A Payday Loan Work?
A payday loan is generally thought of as an emergency loan as it offers a smaller sum of money, often paid into the bank on the same day if the loan is approved.
The sum of money is generally up to £500 but this varies from lender to lender. This type of loan is considered one of the easiest to get approval for with a poor credit rating because the sum of money is small and you will repay the loan back quickly, within one to three months.
The payday loan gains interest on a daily basis, because it is repaid back quickly. With this in mind, the quicker you can repay it, the less the loan will cost you in interest. Loans of this nature generally do not have an early repayment fee but do check the terms and conditions to make sure before signing up.
The lender collects the loan repayments through direct debit, either in a single payment if you chose to repay the loan in one installment on your next payday, or over three paydays.
Payday loans are often called emergency loans, as they are a great way of putting your hands on a small cash sum to cover any financial emergency. You might consider applying for a payday loan if you:
- Are met with an unexpectedly large bill and the final demand drops through the letterbox with payment needed to be made before your next payday;
- Your car breaks down and you need to have it towed to a garage and repaired but you don’t have enough funds in the bank to cover the repairs;
- Your child comes home from school and tells you the rest of the money for that school trip you paid the deposit for has to be paid and payday is some time away;
- A major appliance breaks down and it needs repairing or replacing and you do not have the money to do so.
In short, the payday loan can be used to cover just about any emergency that crops up where you need a small amount of cash to cover it. This type of loan should not be relied upon on a month-to-month basis, as it would work out costly to keep borrowing this way because interest rates are generally high.
How to Apply For a Loan
Applying for a loan online is very easy and takes just minutes as we have kept the process as simple as possible.
To be eligible you do have to be over the age of 18, be a UK resident, have a bank account, debit card and set up a direct debit to make the loan repayments.
Simply choose how much you want to borrow and how long you want to repay the loan over and we will then try to match you up with one of a panel of lenders we work with. Lenders offer numerous loan options, affordable loans with competitive rates of interest.
If one lender cannot offer you a loan, we move to the next and so on. This means you only need to fill in your details once to search with a panel of UK lenders. Regardless of your credit rating if the lender thinks you can repay the loan, based on your income and outgoings, they will offer you a loan.
Once we have matched you to a lender, you can check out the loan details, go-ahead, and sign up for the loan if you are happy to do so.
If you have a bad credit rating, there are more options open to you than a guarantor loan. While a guarantor loan may be easier to get approval for, there may be other more suitable loans for your needs.
There are many types of loans for bad credit no guarantor available, whether you want just a small cash sum of money by way of a payday loan or short-term loan or you need to get hold of a larger sum of money by way of a personal loan.