If you need to borrow money, and you have a very bad credit rating you might think your chances of getting a loan are next to impossible. This might not necessarily be the case and we are going to look at two popular loans for really bad credit in the UK that you might be able to get approval for with a lender.
Lenders Are More Willing to Consider Offering Small Cash Sums
Lenders are more willing to take a risk on people with poor credit ratings if only a small sum of money is requested. It makes sense that a lender may be willing to you a loan for a couple of hundred pounds but not one for many thousands of pounds. Therefore, with this in mind, the payday and short-term loans are two types of loans in the UK that generally have a decent approval rate, even for people with poor credit ratings.
Why Payday Loans Are Popular
Payday loans are one of the most popular types of all loans in the UK applied for by people whose credit rating is less than perfect.
In the UK, NHS workers apply more than anyone else for payday loans, with Birmingham, Leeds and Manchester coming out top for cities where payday borrowing is popular.
These types of loans for really bad credit are popular as they can bridge the gap between an unexpected financial outlay and payday.
When borrowing this way you need to bear in mind that interest is added onto the loan on a daily basis.
How Much Can I Borrow With A Payday Loan?
Sums of money in the region of £100 to £500 are generally applied for with a payday loan.
Lenders class this as being small sums so they are more willing to take a risk on someone with a poor credit rating than if they wanted to borrow thousands of pounds.
How Long Can I Spread A Payday Loan Over?
Payday loans are only very short-term loans. When they first arrived on the market, the loans were repaid in full on the next payday of the borrower. This is still a choice today and this is the best way to take out a payday loan as it incurs less interest. It also means the loan is cleared off in one lump sum.
However, lenders will allow you to spread the repayments of the loan out over two or three paydays.
If you are borrowing towards the higher end, up to £500, spreading the payday loan over three paydays can make the loan more affordable. However, it is going to cost you more to borrow in total.
Why Are Short-term Loans for Really Bad Credit Popular?
Short-term loans are another popular choice of loans for people with bad credit as again, the loan is repaid back quickly and only a small sum of money is borrowed.
This type of loan might be suitable if you want to borrow more than what you can with a payday loan but do not want to spread the cost over numerous years.
How Much Can I Borrow With A Short-term Loan?
The amount you might be able to borrow with a short-term loan is going to depend on the lender, your credit rating and ability to be able to repay the loan.
However, most lenders class short-term loans as loans between £500 and £1,000.
How Long Can I Spread A Short-term Loan Over?
Again, how long you can borrow is going to depend on factors such as the lender, your credit rating and loan affordability.
Lenders will generally class a short-term loan as being a loan that is repaid within a period of 12 months.
What Are The Advantages to Payday or Short-term Loans?
There are many advantages to the payday or short-term loans and these include:
- Both loans offer small sums of money which the lender sees as being less of a risk than a loan for many thousands of pounds;
- They are quick and easy to apply for online in minutes;
- Lenders even consider people with poor credit ratings providing the loan is affordable;
- Payday loans can be used to fill a cash shortfall that you know you can cover when your next payday comes around;
- If you apply with our help, we can match you with a lender from a large panel of lenders. This means you make just one application to access numerous lenders;
- Lenders we work with will take your current circumstances and verifiable income into consideration;
- The entire loan application is undertaken online;
- You get an instant decision;
- Money from payday and short-term loans is generally paid out on the same day.
Are There Downsides to A Payday or Short-term Loan?
There are many things to consider when taking out any loan. While they are not particularly downsides, you might want to consider:
- The loan is going to be affordable and you are not going to be left struggling for money when the repayment or repayments are taken from your bank;
- The APR on loans for bad credit is going to be higher than for someone with a good credit rating;
- The APR on payday loans is often shown in thousands of percent, which can be frightening. However, the APR is annual percentage rate and you are repaying the loan back within three months so will not pay that rate;
- Payday loans can be expensive if you have to continually roll the loan over as fees and additional interest is added to the loan.
Providing you understand the advantages and disadvantages to payday and short-term loans, and you can afford the loan, they can lend a helping hand in times of need. The lenders we work alongside will make affordability checks when you apply for loans for really bad credit and they do offer some of the most competitive rates along with affordable loans.
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