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Types of Small Loans for Bad Credit
9 Mar 2019

What Types of Small Loans for Bad Credit Are There?

If you have a bad credit rating but need a loan of just a small sum of money, there are a couple of choices out there. Here we are going to focus on the types of small loans for bad credit that are out there.

The two main choices of small loans are:

  • A short term loan;
  • A payday loan.

Both of the above loans offer relatively small amounts of cash via loans that are repaid fairly quickly. The most suitable choice is going to be dependent on the amount of money you need along with how quickly you want to repay the loan.

Things the Two Loans Have in Common

In order to be allowed to apply for either the short term loan or the payday loan, you are going to have to meet some criteria. The criteria are identical for either loan or any other type of loan you might consider, including a guarantor loan or personal loan.

  • You do have to be at least 18 years old;
  • You have to have a UK postal address;
  • You should have a regular amount of income coming in from work or benefits;
  • You need to have a bank account in the UK;
  • A debit card should be attached to the bank account;
  • The bank account needs to be able to accept direct debits.

Both types of loans will require that you fill in your personal details when applying. This includes the information above along with how much monthly income you have going into the household and what you have to pay out each month.

Lenders use this information when they are deciding if the loan is going to be affordable to you. The lenders we work with take your current income and outgoings into account along with your credit rating, to decide whether to grant the loan.

Both Short-term Loans and Payday Loans Can Be Applied For Online

Both the short term loan and the payday loan can be applied for online. The entire loan process is fast and easy and one of the main benefits is that you know within minutes if you have been accepted for the loan.

Search Many Lenders with A Single Application

Another benefit is that we can match you up with lenders offering small loans and if one lender turns you down, we simply move to the next. This way there is more chance of being approved by a lender from making just one single loan application. If you make searches for lenders yourself and have to keep applying for loans, the searches are recorded on your credit file and this goes against you.

Both Loans Pay Out Fast

Finally, there is the benefit that both loans pay out quickly and this is great if you are met with a financial emergency and you need cash there and then. Both loans may pay cash into your bank account within hours of you making the application and being approved.

Ways in Which Small Loans for Bad Credit Differ

Just as there are things that both types of loans have in common, they both differ from each other in some ways.

The main difference is how much you might be in a position to borrow and the other difference is the term of the loan. The term is the amount of time you can spread the cost of the repayments.

So let us consider the two types of loans, the short term loan, and the payday loan, so you will have a better understanding of which might be more suitable.

Short-term Small Loans

The short term small loan will usually offer between £500 and £1,000 but this is going to depend on the specific lender and your credit rating. Generally, the smaller the sum of money you want to borrow, the more likely the lender is going to offer you the loan if your credit rating is poor.

Spread the Repayments For Up To One Year

While the definition of short term is going to vary from lender to lender as a rough guide, you can expect to be able to spread the repayments over a period of up to 1 year. With some lenders, the term offered may be less and with others, it may be slightly longer. However, it will not be spread over many years.

Short-term loans can be taken out for any reason and usually, if you are approved for a small loan online, the money can be paid into the bank on the same or next day.

Payday Loans

Payday loans are sometimes referred to as quick loans or fast loans owing to the fact that the whole loan process is undertaken online and money can be paid out within hours.

Great Choice of Loan When Met With an Unexpected Outlay

With the payday loan, you might be in a position to borrow in the region of £100 to £500, which makes this an excellent choice of a loan if the unexpected crops up and you do not have the money.

There are many reasons why people might need to get their hands on a small sum of money fast. This includes having an unexpected bill come in that has to be paid before payday, going into an unauthorised overdraft with high fees and payday is some time away. You might also take out a small loan to pay for car repairs or repairs to an appliance you cannot manage without.

Repay the Loan within One To Three Months

The term of the payday loan is lower than that of the short-term loan, as usually, you will repay the whole of the loan, including the interest, on your next payday. It may be feasible to spread the cost of the loan out over three months.

As the term of the loan is only one to three months, the interest rate is charged on a daily basis. If you can pay off the loan earlier than the agreed dates, you can save on interest.

The interest rate for the payday loan is generally higher than that of other loans and it can be an expensive way of borrowing if you cannot repay the loan on the agreed dates. This type of loan should not be a loan to rely upon on a month-to-month basis, instead, it should be considered for use in emergencies only.

Other Types of Loans to Consider

While the short term loan and payday loan are two of the most popular types of loans for those wanting to borrow a small sum of money, there are other loans available.

Guarantor Loans

If your credit rating is very bad, you might want to consider applying for a guarantor loan. Lenders are the most likely to approve a loan of this nature for people with a poor credit rating as someone stands as a guarantor that the loan will be repaid.

Your guarantor will need to have a good credit rating, be over the age of 18, and meet the additional criteria set out by lenders for borrowing. The guarantor cannot be a partner or spouse but can be a relative or good friend.

However, if you find that you cannot manage the loan repayments they would fall back onto the person who stood as guarantor and this can cause issues with relationships and friendship.

A Personal Loan

Another type of loan to consider is a personal loan. Lenders will usually allow you to borrow up to £5,000, so it is not necessarily classed as a small loan.

The personal loan is an unsecured loan and you can use it how you wish. This type of loan might be spread out over 36 months to make the repayments more affordable, but it will accumulate more interest the longer the term.

In Conclusion

There are small loans for bad credit available for everyone from £100 to £1,000 or more. If you apply with us, we can help to match you up with a lender who offers affordable loans and numerous loan options. The lenders we work with will have to check your credit rating, but they also base their decision on the amount you have coming in and going out each month. If they think the loan is affordable, they may be in a position to offer you regardless of your credit score. Make just one application by filling in your details and we can search with a panel of lenders to better your chances of obtaining a loan.