The title is a question that is on the lips of millions of people in the UK who need to get a loan but have a bad credit rating. So is it possible to get very bad credit loans or are they just a dream?
This is not something that is easily answered, as there is no one loan to fit all. Just as you would not buy a size 10 in clothing if you were a size 16, as it would not fit, the same applies to loans.
You would not expect a loan offering many thousands of pounds spread out over numerous years to fit your needs if you have a bad credit rating and only needed a small sum of cash.
Luckily, there are different options and different loans to suit different purposes. The same applies to credit ratings. While there is never any guarantee you will be approved for a loan, some loans are generally easier to find approval for than others are.
In this article, we are going to look at and answer many questions associated with loans for bad credit. They include:
- What lenders take into account when you apply for a loan;
- The most suitable types of loans for people with poor credit ratings;
- Payday, short-term and guarantor loans;
- Things to consider when looking for a loan;
- Applying online for a loan.
So, let us go on to take a look first at some of the factors lenders will take into account when deciding whether to approve a loan.
Factors That Lenders Take Into Account
Lenders in the UK do need to look at your credit file when you apply for a loan. However, the depth of the check is going to be dependent on the amount of money you want to borrow, and the term of the loan.
While this might not sound good if your credit rating is poor to bad, there is still hope as your credit rating is not the only thing that the lenders we work alongside will consider.
Verifiable Income and Affordability Check
Your verifiable income is something that the lenders we work alongside will consider. Lenders do realise that people make mistakes and that circumstances can change. Your circumstances might have changed drastically from when you earned a bad credit rating and you might now be in a much better position.
Lenders will want to know how much money you are paid each month and what you payout.
They will deduct your outgoings from your income to find out what you have left each month. This gives them a good idea as to how much disposable income you have left, which could be used to pay your loan.
Of course, this is something that you should already have done yourself to ensure that you can afford the loan repayments before applying.
Most Suitable Types of Very Bad Credit Loans
Some types of loans are going to be more suitable than others for you to apply for if you have a poor credit rating.
Generally, the least amount of money you want to borrow and the faster you repay it, the better the chance of being approved. Of course, as with anything in life, there is no guarantee.
Payday Loans for Bad Credit
The payday loan may be a suitable loan for people looking for very bad credit loans, as the sums of money offered are usually small and the loan is paid back quickly.
While the amount of money you might be able to borrow with a payday loan is usually between £100 and £500, this might differ with lenders. Some might offer more and of course, your current circumstances are going to be considered.
Above all, affordability is the key to borrowing. No lender is going to offer you a loan that you cannot reasonably afford to repay.
Lenders are more lenient with payday loans as they are paid back very quickly. You can take out a payday loan for just 30 days and repay the loan in full, along with interest, on your next payday.
If you need to borrow towards the high end of the scale, you can spread out the repayments for up to three paydays.
While this gives you some leeway, you are going to pay more in total as interest is calculated daily. Where possible take the loan over the shortest period possible.
It is important to consider that you have to budget on your payday for the lender taking the repayment or repayments so you do not leave yourself short.
If you have a poor credit rating but need to borrow between £500 and £1,000, a short-term loan might be better.
Again, while lenders will offer up to £1,000 the amount they may offer you is going to depend on your circumstances and verifiable income along with your credit rating.
The lender will make an affordability check to make sure you can repay the loan and they will look at your credit file.
If your credit rating is very bad the only loan you might be offered is a guarantor loan.
There are advantages and disadvantages to guarantor loans.
Advantages to a Guarantor Loan
One of the main advantages is that with someone at your side to guarantee the loan there is a better chance of approval.
This is because the guarantor will sign up to say they will take over the repayments of the loan if you fail to do so. This means the risk to the lender is minimal as if you fail to repay they can get the repayments from the person who stood as guarantor.
Disadvantages to a Guarantor Loan
The downside to this is that you do have to speak openly to a good friend or relative about your financial problems and the fact you cannot get a loan on your own.
This can cause issues among friendships and relationships as not everyone wants to be a guarantor but they may feel pressured into doing so. You may also feel awkward if for some reason you cannot continue meeting the repayments and they fall back onto the guarantor.
Interest rates are usually high with guarantor loans.
Factors to Take Into Account When Considering Loans
Now we will look at some of the factors you might want to take into account before you apply for a loan.
Small Loans Can Help Boost Your Credit Score
Applying for a small loan and repaying it back on time can have a positive effect on your credit rating. While at the same time, it offers you a helping hand of cash when you need it. Payday or short-term loans can help to rebuild your credit rating but only if you repay as agreed.
Don’t Borrow More Than You Need
You should never be tempted to borrow more than you can reasonably afford to borrow, however tempting it might be.
Interest Rates on Guarantor Loans Are High
If applying for a guarantor loan you need to be aware that the interest rates are usually higher than with other loans. Therefore, you might want to consider this loan as a last resort.
The APR on Payday Loans
The APR on payday loans is usually shown in many thousands of percent. However, you are not paying over the year, just one to three months. Therefore, you will not be paying thousands of percent.
Interest is added onto Payday Loans Daily
Do not forget that interest is added to payday loans on a daily basis. Therefore, the least amount of time you take the loan over the less it will cost in total to borrow.
Eligibility for Loans
Whether you have a good credit rating, bad or poor you do have to be eligible to apply for a loan online. The general criteria include:
- You need to be 18 at least;
- Have a regular income;
- You hold a debit card;
- Have a bank account;
- You live in the UK.
Apply for a Loan Online
One of the quickest ways to apply for a loan online is to do so with our help. We can help to match you with lenders willing to consider offering loans to people with less than perfect credit scores.
We Work Alongside a Panel of Lenders from the UK
We work with a panel of lenders from the UK. What this means for you is that we can do all the hard work of searching with a large panel of lenders and you only need to make one single loan application.
Sure, you could search yourself online to try to find lenders willing to consider offering you a loan but this takes time. Another disadvantage is that each search is noted on your credit file, and can go against you.
You Get an Instant Decision
It also means that you get an instant decision. If approved the money can be directly paid into your bank account. Often, this is on the same day as you applied for the loan, as the entire application is made online.
The panel of lenders we work alongside offer numerous loan solutions, affordable loans, some of the most competitive rates and will consider verifiable income.
Whether you have a good, poor or bad credit rating, we can put you in touch with lenders offering very bad credit loans. Apply today for a payday, short-term or guarantor loan today.