Anyone with bad credit may believe that borrowing is out of his or her reach. While those with bad credit may struggle to get access to loans offering many thousands of pounds, there are small loans for bad credit that may be more accessible. So what are your options if you have a poor credit rating and want a loan?
What Is Bad Credit?
Bad credit is another way of saying that you have a poor credit rating. A poor credit rating is in relation to your credit score, which is on your credit file, which is dependent on many things. Things that go towards determining how good or bad your credit rating is, include:
- Whether you have CCJs against you;
- Filed for bankruptcy in the past;
- How much credit you have;
- Whether you have missed repayments in the past;
- Whether you are late paying bills;
- How much credit you have used out of what is available.
A credit rating is essential if you want to take out a loan, credit card or mortgage. It can even affect whether you can take out a mobile phone contract. This is not to suggest that you cannot get a loan if your credit rating is poor, just that you will not get access to the best loan rates or deals.
Payday Loans Are Small Loans for Bad Credit
Payday loans are small loans that people with a poor credit rating may apply for and be approved. The criteria for borrowing with a payday loan is not as strict as the criteria for larger loans because only a small sum of money is involved.
A payday loan may be a suitable type of loan for anyone who needs to have access to a small cash sum, usually between £100 and £500. The loan is taken out over the short-term; it is generally repaid within one to three paydays.
As the sum of money is only small and you are repaying it back fast, lenders are more lenient even if you have a poor credit rating. A payday loan is generally taken out to pay for something unexpected that has cropped up such as a repair to a major household appliance or car.
The Competition and Markets Authority conducted a survey in 2014 at a time when the number of people applying for payday loans was at an all-time high. They revealed that 52% of people taking out a payday loan had done so due to an increase in their outgoings or expenses. 59% of people who took out loans said they did so as they could not have managed without purchasing the item they paid for with the loan.
Short Term Loans Are another Option
Short-term loans are another popular option of loans among those with a poor credit rating.
The short term loan generally offers between £500 and £1500 but this would depend on the lender, with some perhaps offering more and others less. The short-term loan is repaid back in the short term, usually up to one year. But again this is dependent on the lender’s terms and conditions and your credit rating.
If you are looking for small loans for bad credit, we could help to match you up with a lender. We work together with a panel of lenders all of whom offer affordable loans, competitive rates, and numerous loan options. Lenders take your current situation into account, which means they base their loans on your verifiable income not just your credit rating. As we work with numerous lenders, there is more chance of our finding a lender to match your needs, from one single loan application.