Emergencies will never give you the lowdown before showing up. Although you brace yourself for the unexpected by salting away some money, your savings might fall short of cash. Thankfully, a few direct lenders are out there who can lend you a helping hand. However, borrowing money is not so easy when your credit score is bad.
A bad credit rating is the acknowledgement of your missed payments in the past. Lenders would want their money back, and a poor credit history is deemed to be highly risky. Chances are you will get money at a high interest rate. Getting the nod for loans for bad credit in the UK is not so difficult, but there are things you should look at before putting in the application form.
- Your credit score should not be very bad
A few lenders are out there who can approve very bad credit loans with no guarantor, but it is vital to ensure that your credit rating is not lower than the bare minimum they accept. Otherwise, your application will be turned down. Moreover, you should have a satisfied CCJ.
Interest rates for very poor credit loans are very high. You should carefully ensure your repaying capacity because you may end up falling into debt. Check your credit report to see if there is any erroneous information. Dispute it if you find there are mentions of accounts you do not identify. Credit bureaus take at least a month to rectify those entries.
- Be prepared for hard checks
When you apply for a loan, your lender would like to know your past financial behaviour. They are not keen on knowing your credit score because they use their own formula to calculate the risk involved in lending you. They are rather keen on fetching details such as:
- Missed payments and defaults
- The number of inquiries
- The types of debts you owe
- Any CCJ, bankruptcy or forbearance
- The amount of debt you owe.
A responsible lender will carefully examine your overall financial condition to make sure you do not borrow more than you can repay. When they gather all this information from your credit report, an entry is recorded on your report. Each time the inquiry is made, you lose at least five credit points, which may be double or three times in case of multiple inquiries, dinging your credit rating. However, restoring your credit score is not far off. You will see it improving after making a few payments.
- Not every time you will get an instalment repayment plan
Bad credit loans generally come with instalment payment plans. The repayment length can vary between 6 months and 12 months, but if your borrowing sum is not large enough, you will have to pay back the debt in one go.
Small bad credit loans are similar to payday loans. These same day cash loans cannot be more than £1,000, and therefore, many lenders accept them in one instalment once and for all. A few lenders, however, are out there who may offer you weekly instalment plans. It can be two or three weekly instalments, depending on the borrowing sum. Most of the lenders have stopped weekly instalment plans, so it is quite hard to find anyone with this facility.
In case you miss a payment, your loan will be rolled over. This quickly adds interest to your account. Make sure you can repay your debt to avoid rolling up debt.
Steps to get loans for bad credit in the UK
Here is how you can get loans for bad credit in the UK:
- You should check your credit report to see if your score matches the approval criteria set by the lender you are applying from.
- You should be registered on the electoral roll. It is an important part of the affordability check because every lender would like to verify your address.
- Be prepared for hard checks. If your credit rating is extremely bad and you do not want to lose your credit points, choose a lender with soft checks. However, interest rates will be even higher.
- Make sure you provide the correct details of your finances in a loan application.
Ways to get a bad credit loan without more ado
Chances are your lender does not sign off on your application as your overall financial condition is too weak. You can do up your chances of approval by:
- Arranging a guarantor, a third person who will be responsible for paying off the debt in case you make a default. It whittles down the risk of a lender loaning you. However, the guarantor must have a good credit rating. Bear in mind it is hard to have anybody agree to act as a guarantor because their credit report will be ruined, too, if you miss the payment.
- Considering an alternative. You can think of choosing other loans that do not follow the strictest criteria. For instance, a credit card can be a good way to meet your emergency expenses, provided you do not have struggles to settle your account.
Tips for improving your credit score
Here are the ways to make your credit report better:
- You should never borrow money for regular expenses, no matter what.
- Save money for a rainy day. If possible, give a purpose to your savings.
- Keep going over your credit file periodically to ensure all details are on the mark.
To wrap up
You can obtain loans for bad credit without taking up lengthy and complicated paperwork. These loans are small, so you can receive money the same day. Before applying for these loans, you should always check your repaying capacity. Do proper research so you get an affordable deal.
Hi everyone, I am Lukas Thomas. I am a professional writer and author with having specialisation in the UK financial sector. I have more than 13 years of experience as the financial writer and hope it will continue longer. I have done my post-graduation in Masters of Business Administration (MBA) in Finance. Currently, I am performing my responsibility as a Senior Loan Expert in Fundingpeer, which is the fastest-growing online direct lending company. My job is to prepare borrower-friendly loan deals as per the company’s guidelines. I also write research-based blogs for the company’s official website. You can read them and gain knowledge on any loan product.