No one sets out with the intention of getting a bad credit rating. However, this is precisely what happens to many people. Obtaining a bad credit rating does not mean you are a terrible person. It just means you have made some financial mistakes in the past. What a bad credit rating means is that obtaining future credit may seem impossible. If you are considering loans for people with bad credit here is what you need to know.
Don’t Be Put Off From Applying for Credit
Many people with bad credit who are denied a loan give up almost immediately when they are rejected. However, don’t be put off from applying for loans, as there are lenders out there who are more lenient than others are who may give approval even if your credit rating is poor.
There are numerous different types of loans out there with some being more suited to people with bad credit than others are. Some are also more costly options than others are. When you start to look for loans for people who have a bad credit rating you will find the best rates of interest are not offered. This is understandable. However, here at Bonsai Finance, we work with lenders to find you a loan that offers competitive rates of interest for your circumstances.
When looking for loans suitable for people with bad credit, there is more to it than just deciding what type of loan you want. There are various factors to consider, all of which might help you in your search for a loan and getting approval.
Choose a Loan through an Expert in the Field of Finance
A google search might be the first place you turn to when looking for a loan suitable for bad credit. However, in retrospect, this may not be the best solution to find the ideal loan for you.
When conducting a search on your own, you will be presented with many providers all who claim they will offer you a loan despite the fact that you have bad credit. However, this is usually not true. No provider will guarantee you a loan so be wary of any on the search page that leads you to believe they will guarantee you a loan.
There is a much better way to undertake a search for a loan and this is with us, Bonsai Finance.
We Work With Lenders Offering Affordable Loans Based on Verifiable Income
We do not offer loans ourselves, instead, we work with numerous lenders offering loans of all types to all people. This includes people who have a less than perfect credit rating. The lenders we work with offer affordable personal loans and we can help match you with the most suitable lender based on your personal circumstances. Loans offered by the lenders we work with are offered based on verifiable income instead of your credit rating.
As verifiable income takes precedence over your credit score, there is more chance of our being able to put you in touch with a lender who will offer you a loan than there is in you finding one in a search.
Applying For Your Loan
We make the whole process of applying for a loan very easy. In fact, you can get a decision in just a few steps.
One of the first things to ensure is that you are eligible for a loan with the lenders we work with. Our lenders will consider anyone regardless of their credit rating providing you:
- Are over 18 years old;
- Have a bank account;
- A regular income;
- Live in the UK;
- You can create direct debits.
The first place you might want to start is to use the loan calculator to get an instant quote based on the amount you want to borrow and the term of the loan. From here, you can get a good idea of the loans that might be available to you.
Loans are available from as little as £100 and up to £5000. The loan can be repaid in as little as three months, known as a short-term loan, or spread out up to 36 months. This means our lenders offer loans that are suitable for the unexpected, such as a breakdown of an appliance, or loans to pay for a new appliance.
The whole process is simple:
- Choose the amount you wish to borrow;
- Choose the amount of time you want to repay the loan over;
- Provide your personal information including a source of income;
- Provide details about your UK bank account and debit card;
- We search with our lenders to find the most suitable deal;
- If your loan is approved you are given confirmation;
- Money is transferred to your bank account and you can spend it how you want;
- You then repay the loan back by direct debit or bank transfer.
The Types of Loan for Bad Credit
Our lenders offer different types of loans based on the amount you want to borrow, the term of the loan and your circumstances. We will explain these in more detail later but they include:
- Guarantor loans;
- Short-term loans;
- Personal unsecured loans;
- Secured loans;
- Instalment Loans.
Guarantor loans may also be thought of as friendship loans but they can be the make or break of friendships.
A guarantor loan may be one of the easiest loans to apply for if your credit rating is low. However, there is a downside to it and this is the fact that you need to find someone who is willing to stand as guarantor for you. This means that if you fail to make repayments of the loan your friend or relative will have to take over the loan repayments.
This, of course, could cause issues. The first being that you have to ask someone to be a guarantor, which could make a friend or relative uneasy. Second, if you fail to pay the guarantor is stuck with the loan repayments leading to a break down in the friendship or relationship.
Short Term Loans
Short-term loans may be the right choice if you only wish to borrow a smaller sum of money and you can repay it back within a couple of months.
Short-term loans can usually be taken out if you have a bad credit rating as the loan is paid back quickly and the sum of money borrowed is under £1000. Again, the amount you may be in a position to borrow will depend on your income and ability to be able to repay the loan.
The only downside to short-term loans is that the amount of interest repaid along with the amount you borrow is usually higher than with other loans.
Short-term loans may be suitable in the following situations:
- You have an appliance that has broken down and it needs repairing;
- You find you have to pay out for new tires for your car after a puncture;
- A bill you had forgotten about needs to be paid before your next payday;
- Your child needs new clothing and payday is some time away;
- Any other situation where a small sum of money is needed that can be repaid back in a month or so.
Personal Unsecured Loans
A personal unsecured loan is another option of a loan that may be offered even if you have a poor credit rating.
With the personal loan, you may be able to borrow larger sums of money, up to £5000. The loan can also be spread out up to 36 months.
Bear in mind the longer the loan is taken out for the more interest you will pay but the lower the monthly repayments will be. When considering this, always make sure the repayments are going to be affordable.
Personal loans or instalment loans may be suitable for:
- Having to pay out for a large unexpected repair such as the boiler or roof;
- Taking a much needed holiday;
- Having to purchase a car as yours has broken down;
- A large appliance has broken down and needs replacing.
A secured loan may be offered if someone wishes to borrow a larger sum of money, often thousands of pounds, and wants to repay it over many years.
With a secured loan something needs to be put up against the amount borrowed, usually your home. If you are unable to repay the loan, your home is at risk.
An instalment loan is taken out with a number of scheduled payments set in place. Many loans are of this nature and as the loan is repaid over a set period of instalments, you know exactly how much the loan is going to cost.
What Is The APR on A Loan?
When looking for loans one of the most important factors is the APR. The APR is the annual percentage rate. Different loans come with different APRs and this can be confusing. Essentially the higher the APR the more interest you will pay.
The APR is in reference to the total cost you borrow in one year. This includes interest that you have to pay back. For instance, if you take out a loan of £10,000 and the APR is 5.5% and take the loan over 36 months, paying back £301 per month, the total amount of interest will be £848.60. This will take the loan to £10, 848.60 in total.
What Is Representative APR?
You might also see representative APR mentioned. This differs from the typical APR of the loan. When comparing loans with lenders you may see representative APR. What this means is that 51% of people received a rate the same or lower than the representative APR. This is not to say that all people are offered the same APR.
Often when applying for a loan and the interest rate looks the best, you might find you are not offered that rate as lenders give a personal APR, which is based on personal circumstances. Generally, this is why people with a poor credit rating are offered loans with higher rates of interest than people with a good credit rating.
Even more bewildering is the fact that different lenders have different APRs. Different types of loans will also come with differing rates of interest. For example, payday loans generally have an interest rate in the region of 400% APR while the typical loan offered to someone with a reasonable credit rating will be around 29.9%. Again, the APR you are offered will depend on your circumstances.
While 400% might seem to be a huge sum for a payday loan, take into account that the payday loan is generally not taken out over the year. Payday loans are meant for people who want to borrow smaller sums of money and repay the loan back within a month or two in full. Therefore, you would not pay out 400%.
Finding a loan is never the easiest of tasks due to the sheer number of loans and lenders out there. It becomes even more challenging if you have a poor credit rating. We understand the difficulties people face when trying to obtain credit with a less than perfect credit score.
We can save you the time of trying to find a lender willing to offer you an affordable loan. Our lenders put more focus on your ability to repay the loan instead of your credit rating and the past.
Finding and applying for loans for people with bad credit with our help takes just a few steps. Within minutes, you know if you are accepted by one of the lenders we work with. Use our loan calculator to find a suitable loan today.