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Loans for People with Bad Credit Options
6 Mar 2019

What Options Are There for Loans for People with Bad Credit?

Surprisingly there are many types of loans suitable for people who have less than a perfect credit rating. The most suitable loan is going to come down to just how bad your credit rating is, how much you want to borrow and the term you want to take the loan over. Some loans for people with bad credit are easier to be approved for than others, but here we look at the options open to people with a poor credit rating.

The Easiest Types of Loans to Be Approved For With Bad Credit

As mentioned above there are some types of loans that are typically easier to be approved for than others are. It really comes down to what the lender thinks is a bad credit rating as some are stricter than others are. What one lender might think is a very bad credit score which means you are a big risk, another might think is only poor and may be willing to take a risk on you.

Generally, the smaller the sum of money you need to borrow and the quicker you can pay it back, the more likely you are to be approved for the loan. The four main types of loans that people with bad credit may get approval for are:

  1. Payday loans;
  2. Guarantor loans;
  3. Short-term loans;
  4. Personal loans.

Low-Risk Payday Loans

With the payday loan, you borrow what lenders consider to be a small sum of money and repay it back within one to three paydays or months. As the name of the loan suggests the loan is repaid on the day you are paid. When you apply for the loan the lender will want to be informed about the date or dates you are paid.

With loans of this nature, lenders may offer between £100 and £500 and allow you to repay the loan with interest on your next payday or spread it out over three paydays. As the sum of money is small, payday loans are generally same day loans as if approved the money can often be paid into the bank of your choice on the same day, often within hours of applying. Loans of this nature are a godsend if you find yourself short of money but something unexpected pops up that requires money you do not have.

As the payday loan is paid back quickly the interest is added onto the loan on a daily basis so it is in your best interest to repay the loan as soon as possible to keep the interest down.

Guarantor Loans Are Less Risk to the Lender

The lender sees guarantor loans as less risk if you have a bad credit rating due to the fact that you have someone who stands beside you to guarantee the repayments of the loan.

With the guarantor loan, you do need to talk to someone about your finances and admit that your credit rating is less than perfect. Not everyone is happy to do this as it means opening up to a good friend or relative. Your spouse or partner cannot stand as the guarantor. There is also a risk to the friendship or relationship as if somewhere down the road you find you cannot meet the repayments of the loan the guarantor will have to take over the repayments.

Therefore, guarantor loans are less risk to the lender, which means there is more chance of someone with a bad credit rating getting approval, but this type of loan comes with downsides.

Short-term Loans Paid Within One Year

While the definition of short-term loans is going to depend on the lender, they are typically loans that can be spread out over a few months but not usually longer than one year.

Short-term loans can be an effective way to borrow if you need to get hold of between £500 and £1,000 and spread out the repayments. Short-term loans do not need a guarantor and they are not secured on your property. They can be used to cover any financial need and as with any type of loan there is interest added on to the amount you borrow. Of course, the longer you spread out the loan the more you are going to pay in interest.

Personal Loans for People with Bad Credit

Whether or not you can get approval for personal loans if you have bad credit is going to depend on the state of your credit rating.

If your credit rating is very bad, you might struggle to get a personal loan. This is because lenders typically offer up to £5,000 with personal loans and allow you to spread the cost for up to 36 months. Approval is going to depend on several factors, along with your credit rating, including the amount you want to borrow and how much you have coming in and going out each month.

A personal loan can be used for anything and interest is generally added onto the loan per year so you do have to bear in mind the APR. The APR is the annual percentage rate, the percentage of interest you pay on the amount borrowed. This amount is added to the total per year, so over many years, it can account for a tidy sum of money.

When considering a personal loan you should also consider whether the interest rate is fixed or variable. The fixed rate APR is the best for anyone who has to budget the loan repayments as the interest would remain the same throughout the term of the loan and you would know exactly how much the repayments are each month. The variable rate would fluctuate and can go up and down. If it goes up, you pay more in interest and if it goes down you would pay less. This is something of a gamble.

Applying for a Loan Online

Applying for a loan has never been easier as everything can be undertaken online. This means that if you need a small cash sum to meet an emergency, it could be in your bank within hours or days.

To apply for any type of loan online you first have to make sure that you are eligible to apply for the loan. This means that you are over 18, you have a regular income coming in, and you live in the United Kingdom and have a bank account. You also need a direct debit card and an account where direct debits can be set up so the lender can take the repayments back.

Choose the Length of the Loan and How Much You Want to Borrow

If you meet the criteria, you can go ahead and apply for a loan by choosing how long you want to take the loan over and the amount you want to borrow. Lenders we work with generally offer loans in the region of £100 to £5,000, to be repaid between 1 month and 36 months.

One Application to Search with Many Lenders

One of the many benefits of applying for a loan with our help is that you can make one single loan application to search with a panel of lenders. This is because once you have filled in your personal information, including your income and outgoings; we will search with the panel of lenders we work with to try to match you up with a lender.

Usually, if you search for a loan yourself you have to find a lender and make the application, which is recorded on your credit file. If you are denied the loan, you then have to search again and find another lender and fill in your details again, including having the search recorded again. Multiple credit searches go against you. With our help, you can make a single application to search with many lenders.

The lenders we work will consider your credit rating but also your income and outgoings. They decide if you have enough money left over, called disposable income, to be able to repay a loan. This gives people with a poor credit rating the chance to borrow.

Affordable Loans with Competitive Rates

People with a poor credit rating are generally not offered the most attractive rates of interest. While you can expect the APR to be higher if you have a bad credit rating, the lenders we work with do offer affordable loan choices at competitive rates.

When applying for a loan always check the rate of interest as this amount is added onto the loan and has to be repaid along with the sum borrowed. You should also check for any additional loan fees, these are also factored into the loan repayments.

When applying for a loan always choose the least amount of time to take the loan over to save paying more interest than needed.

In Conclusion

There are many choices of loans available even for people with a bad credit rating. We do not offer loans ourselves; instead, we work to bridge the gap between those looking for loans and lenders willing to offer loans to people with a less than perfect credit rating.

Loans for people with bad credit are easier to find with our help whether you want to borrow a small cash sum with a payday loan, take out a short-term loan, a guarantor loan or find an affordable payday loan.