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Loans for People with Bad Credit
7 Feb 2019

What Types of Loans for People with Bad Credit Are Out There?

There are no specific loans for people with bad credit as anyone can apply for any loan regardless of their credit rating. However, if you have a poor credit rating there are some types of loans that you might stand a better chance of obtaining approval for more than others.

People with a poor credit rating can apply for the same types of loan that those with a good credit rating apply for. These are typically personal loans, short-term loans, payday loans, and guarantor loans. If you have a poor credit rating, you are most likely to approved for a payday loan or guarantor loan. However, this does not mean that you cannot get approval for the other types, but it may be more difficult.

To be eligible to apply online for any type of loan you should:

  • Be at least 18 years of age;
  • Have a regular income coming into the house;
  • Hold a bank account in the UK;
  • Have a debit card and be able to set up a direct debit to repay the loan.

The Different Types of Loans

All loans are different and here the aim is to explain that difference, in what circumstances the loans might be suitable and how the loan works.

A Payday Loan for Emergencies

One of the easiest loans to get approval for if you have a bad credit rating is the payday loan. This is due to the fact that you are only borrowing a small amount of money so the risk to the lender is minimal, and you are paying it back within a couple of months.

A payday loan might be suitable if you:

  • Want to borrow a small amount of money;
  • You can pay it back within one to three months;
  • You know that you will be able to repay the loan on time and won’t be left short of money on the paydays you arrange to pay the loan from;
  • You need to get your hands on money fast;
  • You need money in an emergency;
  • You understand it is one of the most expensive options for borrowing.

Payday loans should be classed as loans for emergencies. They are not loans to be taken out on a whim just because you fancy that new dress you saw in the window. A payday loan can help to tide you over if say, you forgot about a bill that needs paying before payday or an unexpected major repair needs making.

How Does The Payday Loan Work?

Anyone can apply for a payday loan online and the application is undertaken online without the need for any paperwork. This saves a great deal of time. The application is usually made within minutes and you get a quick decision.

If you choose to apply for your loan with our help, you just have to make one application by filling in your details and giving information about yourself and we will search with our lenders to match you up.

How much you might be able to borrow with a payday loan varies from lender to lender, but you might expect to be able to borrow anything from £100 to £1000. You choose the amount you want to borrow and how long you want to repay the loan. In the case of the payday loan, it is generally spread out over one to three months.

If you are satisfied with the conditions of the loan, and how much the loan is going to cost you in total, with interest, you can go ahead and finalise the loan online. Make sure that you know the dates of repayments line up with when you will be paid and make a note of them. The lender will pay the money into your bank account, often the same or next day. When the time comes for them to collect the repayments, they take them by direct debit from your bank account.

Providing you repay the loan as to the terms and conditions when taking it out, the payday loan can work as it is designed to do.

A Short-term Loan – Repay For Up to 12 Months

A short-term loan is more flexible in regards to the repayments than the payday loan but it is still a loan that is not spread out over many years.

The short-term loan might be suitable if:

  • You want to borrow a larger sum of money than what you can with a payday loan;
  • You want to spread the cost of the repayments over longer than with a payday loan but you want to be able to repay the loan within a year or two;
  • You do not have anybody to stand as a guarantor for a guarantor loan or you do not want to put a family member or friend in that position.

How Does The Short-term Loan Work?

You can apply online in minutes for a short-term loan and you do not need anyone to stand as your guarantor. You will know within minutes if you have been accepted for a loan and we can search with multiple lenders to find you the perfect match.

To apply for short-term loans simply choose the amount you want to borrow and how long you want to repay the loan over. The lenders we work with offer competitive rates with numerous loan options and consider your circumstances at the moment and your ability to repay the loan.

If your loan application is successful, you can check the details of the loan, including how much in total you would pay back and then sign off on the loan. The money is then paid into your bank account.

A Guarantor Loan – Have Someone Guarantee the Repayments

A guarantor loan might be the most suitable type of loan to apply for if your credit rating is very poor. This is because you will have someone guaranteeing the loan repayments so the risk to the lender is minimal.

A guarantor loan might be suitable if:

  • You have been turned down more than once in the past for other types of loans;
  • You have someone close to you that trusts you and is willing to be your guarantor;
  • The guarantor you have in mind is over 18 and has a good credit rating;
  • You want to borrow a larger sum of money that a short-term or payday loan offers;
  • You are young and just starting out with no credit rating to your name;
  • You know that you are able to meet the repayments on the loan.

You do have to give a lot of thought into the guarantor loan before applying for it. Bear in mind that things can become very awkward if you ask someone to stand as guarantor and they would rather not but do not want to offend you. Also, take into account how it might affect the relationship if for some unseen reason you find you not are able to repay the loan. In this case, it would be down to the person who stood as your guarantor to take over the repayments or pay the loan off in full.

How Does The Guarantor Loan Work?

A guarantor loan might be one of the easiest types of loans to be approved for if you have a poor credit rating and want to borrow more than the payday loan or short-term loan. However, it does come at a price and this is that you have to ask someone to stand as guarantor and the interest rates of the loan are generally higher than with a personal loan.

To take out a guarantor loan, you need to find someone who would be willing to take over the loan repayments in the event you find you cannot repay them. This means that the guarantor is risking their borrowing reputation on you. You can apply online with you signing as the person taking out the loan and your guarantor signing to say they will be responsible if you fail to make the repayments.

A guarantor can be a member of the family or a friend over the age of 18, however, you cannot ask a partner or husband or wife.

A Personal Loan – Longer Term Loans

A personal loan is perhaps the least likely out of all the types of loans to be approved for if your credit rating is poor. This is usually owing to the fact that with the personal loan you can borrow a substantial amount of money and repay it over many years.

A personal loan may be suitable if:

  • You want to borrow thousands of pounds;
  • You want to be able to repay the loan over many years;
  • Your credit rating is not perfect but not too terrible either.

How Does A Personal Loan Work?

A personal loan is usually offered as an unsecured loan with either a fixed rate of interest or a variable rate.

The difference here is that you will know exactly how much you have to repay on the loan with the interest. The rate of interest will not change from that of the time you signed up for so there is going to be no nasty surprises or changes to the monthly repayments over the term of the loan. With the variable interest rate, the amount of interest you would repay would depend on whether there was any change in the interest rate. If the interest rates were to go up in line with the Bank of England then the monthly repayments would go up and you would be paying more back on the loan. If they went down it would be to your advantage as the repayments would go down and you would pay less interest.

If you were taking out a personal loan, generally the lower the APR the less you would repay in interest over the term of the loan. However, you also have to keep in mind that there could be fees attached to the loan and these might vary between lenders. Fees have to be considered when comparing loans.

Be wary of loans that are secured as this means you have to put something up as security against the money borrowed.

Applying For Loans for People With Bad Credit

While you might not have access to the low-interest rates and best deals on loans that people with a good credit rating have this does not mean you cannot get a loan. We can help you to find a loan regardless of your credit rating with our panel of lenders. We do not offer loans, but instead, work to match people up with the best lender for their circumstances.

If you are:

  • Over 18;
  • Have a bank account;
  • Debit card;
  • A regular income.

You might be eligible for a loan regardless of your credit rating. The lenders we work with will check your credit score but also take into account your ability to be able to repay the loan. The application takes minutes and you get a fast decision so there is no hanging around waiting to find out if you are approved.

In Conclusion

Just because you have a bad credit rating, it does not mean that you are exempt from taking out a loan. There are many different types of loans with some more suitable than others for those with bad credit.

We work with a panel of lenders who consider your ability to repay. The lenders we work with offer numerous loan options with competitive rates, to people with less than perfect credit. Just make one single application and gain access to a range of lenders all who offer different types of loans for people with bad credit.