You have a low credit rating and want to apply for a loan but are unsure of the types of low credit loans available. If this is the scenario you have found yourself in you have come to the right place. It is possible to get a loan with a poor credit rating and there are many options from which to choose, which we are going to discuss here.
So what are the options for loans if your credit rating is not perfect?
- Payday loans offer up to £500;
- Short term loans offer up to £1,000;
- Guarantor loans offer up to £15,000.
These are three most popular types of loans that people with poor credit ratings apply for. There is also the personal loan but your credit rating is going to determine whether you get approval. This is because the personal loan does not need a guarantor and it is not secured. So, which of these types of loans might be the most suitable for your needs?
The Most Suitable Depends on How Much You Want to Borrow
The most suitable is going to be dependent on the amount of money you want to borrow, along with other things. If you have a very poor credit rating, it might be easier to find approval for a loan offering a small sum of money, such as a payday or short term loan. However, just because you have a poor credit rating it does not mean you cannot get a personal loan. So let us look deeper into the types of loan that might be available.
When A Guarantor Loan Might Be More Suitable
If you have a very poor credit rating, but need to get your hands on a large sum of money a guarantor loan might be the most suitable type of loan.
With a guarantor loan you might be in a position to apply for up to £15,000 and spread the cost of the loan for up to 36 months with the lenders we work with. The loan does not have to be secured on property, but you do have to find someone willing to stand as your guarantor, which can be an issue. The guarantor cannot be a spouse or partner, it should be a good friend or relative, as you are going to have to open up about your financial situation and tell them you cannot get a loan yourself.
However, if you do need to borrow a large sum of money, the guarantor loan might be the only option if you have a bad credit rating and don’t want a secured loan.
Should You Consider A Payday Loan?
Payday loans can work out well for people with poor credit ratings who don’t need to borrow a large sum of money. They are relatively easy to find approval for even with a less than perfect credit rating.
Most lenders will offer you between £100 and £500 with a payday loan. This type of loan is generally applied for if you run into financial difficulty and your payday is some time away, but you know you can repay the loan on that day. Lenders might allow you to spread the cost of the payday loan out over three months or paydays.
In the past payday loans have been said to come with high costs. This is mainly because people see the APR in the thousands of percent. One thing to take into consideration is that you are not repaying the loan over the year, so you are not paying thousands of percent. Payday loans might be more expensive than other types of loans, but they do come with many benefits when looking for low credit loans.
The loans are fast to apply for, they come with an instant decision and a high approval rate when compared to other loans.
If you find yourself short of money in an emergency, such as needing to get hold of cash to pay for repairs to the car, the payday loan can work as intended. Common reasons people apply for payday loans include:
- To pay for repairs to the car;
- Cover an unexpected large bill that cannot wait until payday;
- To pay off an unauthorised overdraft that the bank charges high fees or;
- To pay for your cars MOT or a new tire.
Low Credit Loans – What about a Short Term Loan?
A short term loan is another type of loan where you don’t need a guarantor or secure anything against the loan. You can borrow between £500 and £1,000 with the short term loan and spread the cost for up to 1 year.
A short term loan can be taken out for any reason and while it does give more leeway in the repayments, it is still not a long term loan that will tie you down to repaying over several years.
When considering short-term loans, compare the APR, the higher the APR the more interest is paid. Also check to find out if the lender will allow you to repay the loan earlier than agreed and whether by doing so you would have to pay an early repayment fee. Paying off the loan early can work in your favour as it saves you money on interest. However, if you have to pay an early repayment fee this might not be the case.
There are several options for low credit loans and the most suitable is going to depend on the sum of money you need to borrow. We can help to match you up with lenders offering numerous loan options and some of the most competitive rates. Lenders will consider your ability to repay the loan along with checking your credit rating. We can help to match you with a lender from a panel of UK lenders, which boosts your chances of finding approval.