Bad Credit Loans
If you’re having trouble getting hold of a loan or other kind of credit product then the fault may lie in your credit rating.
If you’re credit rating isn’t up to scratch but you still find yourself in need of extra money, then a specialised bad credit loan may be exactly what you need.
Your credit rating is essentially your financial footprint and is improved or worsened depending on your financial activity throughout your life.
There are a number of reasons why your credit rating could be poor, from missed bill payments, to defaulting on loans in the past, even repeated declined applications for credit cards will worsen it.
If you are finding yourself declined for credit, then the chances are your credit rating is to blame. Your first port of call should be to work to improve it, but in the meantime if you find yourself in need of a bit of extra cash then don’t worry, there are options available to you.
What are bad credit loans?
Designed for those who are otherwise having difficulty getting hold of loans through conventional means, bad credit loans provide a lifeline for many.
As a high risk customer, many creditors will shy away from offering loans to you if you’ve got a poor credit rating but others will extend their lending criteria and will offer you credit.
Make sure that you research the lending criteria for different creditors before you start applying all over though, as any refusals will be recorded on your credit report and will make it more difficult for you to get another loan in the future, leading to a kind of vicious cycle.
Try conducting a soft search (easily doable online) to see which creditors might accept you as a customer.
If you're having trouble getting approved for a conventional loan because of your credit score, consider applying for a guarantor loan instead. This will involve you finding someone who'll agree to pay off your loan for you if you end up defaulting.
Are bad credit loans expensive?
As a result of the added risk associated with lending to customers with bad credit scores, the APR on these kinds of loans will be higher than on most conventional loans, and the amount you can borrow will be capped at a lower level.
One thing you can do to make your loan a little bit cheaper is securing it against any expensive asset you own, such as your house. Of course, this means that there is an added risk of you losing your property if you do default on such a loan, so it’s best to make absolutely certain that this isn’t a possibility before you choose to borrow with an asset put up as security.
Improving your credit rating
As a general rule, proper financial conduct and regularly paying any debts or bills will, over time, improve your credit rating.
Even taking out a bad credit loan can help, if you make sure that you meet every payment date.
One of the surest ways to expedite the process is to take out a credit building credit card. Much like a bad credit loan, these cards are designed for people who are struggling to get credit from other sources, and typically charge high APR while offering a low credit limit. This is to ensure that the customer who takes them out can reasonably be expected to pay back any credit used on time, without falling into dire financial straits.
Alternatives to bad credit loans
The aforementioned credit building credit cards are one alternative you could consider, depending on how much money you need right away. You won’t be able to borrow as much in one go; but it will help tide you over from payday to payday, and will improve your chances of getting a better loan in the future.
You could also consider applying for an overdraft from your bank but again, it depends on how much you need as you are unlikely to be able to arrange an overdraft of the same value as a personal loan – and even if so the fees will be very high.