It’s no secret that having a good credit score is always ideal when it comes to borrowing money but what if you already have a poor credit score?
In this article we take a look at the loan and credit options available in the UK for people with a poor credit record.
Can I apply for a loan with a bad credit score?
Life doesn’t always work out as planned and as a result, not everyone can have a close-to-perfect credit score. From time to time, we all need to take out a loan, whether it’s for buying a car or paying some bills.
If you have bad credit, you might think that you don’t have many options available to you, but there are many lenders who will help you obtain a bad credit loan.
Yes, people with bad credit can access loans
Contrary to popular belief, you can still get a loan even if you have bad credit thanks to the fact that there are loans that cater specifically to people with a bad credit history. These convenient loans are commonly known as bad credit loans and they make it a lot easier for you to get the money you need regardless of how your credit score looks.
One of the downsides to getting a bad credit loan is that you will have to settle for a higher interest rate and more of ten than not, put up some form of security.
In addition, you still need to pass a credit check and an affordability assessment so if you are experiencing any form of financial difficulty you will not be able to access the credit you’re looking for.
Get a second chance with a bad credit loan
There are lenders who understand that sometimes things happen that may cause your credit score to drop. They will work with you to understand your situation better and offer you a tailored credit solution.
With these loans, the focus is more on a person’s ability to repay the loan and not so much on their credit score. Literally, you are not seen as just a number on a computer screen but rather, as a real person.
Affordability is key when dealing with bad credit
Bad credit loans may be unsecured loans, which means you don’t need to put up your car, house or any other asset you own as collateral in order to get a loan. Because of this, they inherently have higher interest rates. But don’t just take the first offer you get from a lender and think that’s the best you’re going to get.
Make sure to compare lenders
Remember, lenders are not all the same. One lender can offer a slightly higher rate while another can offer you something a little more affordable. When it comes to bad credit loans it is just as important to compare loans and offers as it would be with any other lender.
If you are able to offer some form of security such as equity in your home or a vehicle you may be able to access lower interest rates and higher loan amounts.
You can get the ideal loan
Just because you want to apply for a bad credit loan doesn’t mean that you can’t look for a good, affordable rate that suits your circumstances.
One option you have to get a better rate is to find a bad credit loan that’s secured. This will minimise the risks for the lender which will, in turn, make it easier to offer you a lower interest rate, thereby giving you a cheaper loan.
How much can I borrow?
Just like other types of loans, when it comes to bad credit loans, you can borrow varying amounts to suit your needs. However, a noticeable feature of bad credit loans is that they tend to limit borrowers to smaller amounts.
The reason for this is because lenders want to minimise risks on their part. Should you want to borrow more than they’re offering, a secured or guarantor loan is your best option.
Can I improve my credit rating?
A major perk about bad credit loans is that they actually offer you a chance to better your credit rating. Bad credit doesn’t only come from defaulting on a previous loan.
You can develop a negative rating from something as simple as forgetting to pay your phone bill or not having a credit footprint, to begin with, because you’ve never taken out a loan before (this is especially the case for young adults). Some people simply close multiple loan or credit accounts at once and this causes their credit rating to drop.
Get the best deals on loans
The reason why you need to make sure that you choose a lender that can offer you the best possible rate for your loan is that the more affordable your loan is, the easier it will be for you to stay on top of your repayments. This means you’ll be able to repay your loan on time and that will positively impact your credit score.
Once your credit score starts improving, this will benefit you should you want to take out more loans in the future because you’ll get to enjoy better rates and deals. You will also be able to access other services and products which require a good credit score for the consumer to qualify.
Build your credit score with good repayment habits
Your credit score isn’t something that’s fixed – it can be good today than bad within a few weeks. But just because your credit score isn’t perfect right now doesn’t mean you shouldn’t be able to take out a loan if you need it.
Yes, having bad credit makes it harder for you to borrow money. But that is what bad credit loans are for. So if your credit score is sporting some blemishes, a bad credit loan is your answer to financial freedom.
What is, however, important to remember is that just because you’re dealing with a bad credit loan or already have a bad credit rating, does not mean that you can miss repayments or slip up when it comes to managing your new loan.
Whatever your credit rating may be, it can drop further and may actually get so bad that you will not even be able to qualify for a bad credit loan. To avoid this ensure that you make your repayments on time for the duration of you loan term.