Bad Credit Options
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If you have been refused loans by high street banks and other lenders you may believe that your financial situation is impossible. But don't panic - financial help is at hand.
We specialise in helping people like yourself. Explore a wide range of bad credit loans. Use our FREE broking service today. One or more loans could suit you. To learn about loan options use these Quick Links:
Look at the bad credit loan "map" below to help you compare & narrow down your options.
There are a range of loans that can accommodate people with some form of impaired credit rating. There's no single "bad credit loan". Typically these loans for bad credit have higher costs or need some form of security or guarantor. See below for a comparison of bad credit finance. Your specific borrowing options will depend on your personal circumstances and your credit status. If you don't know your credit rating you can find out by using a credit monitoring service.
Everything stems from your credit file. You don't have one until you turn 18 and can start to borrow - things like credit cards, loans, mortgages, etc. So, everyone starts by having no finance history at all.
Having no credit history can itself be a problem as lenders can't judge how reliable a borrower you will be, but while this is a problem it is not a poor credit situation. In this case a credit card company might offer you a card but with a low limit to begin with.
Over time you accumulate a borrowing/repayment history in your credit file. Lenders and providers of credit will record your borrowing behaviour with one or more of the UK's three main credit agencies (Experian, Equifax and Callcredit). The files will show whether you pay on time, whether you get into arrears or miss payments, and whether you default on debts completely. You might also get court judgements against you (so-called CCJs). So, there are degrees of "bad creditness". Some people's files contain more adverse events or adverse events of a more severe nature.
When you apply for credit or a loan the lender will use the data in your file to judge the risk of providing you with credit - in other words they will credit score you. If your score is not high enough they will refuse your application.
Be aware, as well, that the act of applying for credit will be recorded in your credit file (unless the lender does a "soft search"). If you make applications too frequently this fact will have a further adverse impact on your credit history.
Improving your credit rating requires a combination of time and effort. You are not in control of what is already on your file (unless it is incorrect - here's how to check it), but you are in control of new information that is added to it.
This depends on which records on your file are creating a "poor credit history". The following Information is kept on your file:
Live accounts will record your repayment behaviour while the account is open, and then once closed this information is stored for a further 6 years.
So, "getting rid" of an adverse credit history is partly dependent on time, but you can influence it by "diluting" bad news on your file with good news. You can start to rebuild your credit status by ensuring you make repayments for loans and credit cards on time and in full. There are certain products that can help you to do this - e.g. some credit cards and guarantor loans.
You have certain rights if a company decides it won't lend to you:
If the decision is reviewed by a lender then may still turn your application down. Since not all lenders use the same credit reference agencies and because they may/will use different scoring techniques while one lender may refuse your application another may accept it. But be cautious about applying too frequently as this act itself may affect your score!
The phrase "bad credit loan" is a catch-all term for various types of borrowing that can cater for borrowing problems. Some loans, such as guarantor loans, have been specifically designed to help those who have credit problems. In some of the answers to questions above we've covered the reasons why you may have a poor rating.
These sorts of loans are likely to have higher interest rates attached to them simply because people with credit issues are judged as a higher risk (i.e. because of scoring methods used by lenders). Over time a person's rating can improve as they repay loans and bills in full and on time. This means that they will be able to borrow at better rates in the future.
Poor credit loans compensate for the extra risk in one or more of a number of ways:
The options that you can consider are listed above. There is plenty of detail about these financial products accesible from the links above. As you can see there are a number of alternatives, but which are suitable for you depends very much on your personal circumstances.
Some people ask about "high approval loans" but the fact is that whether you are approved or not depends very much on:
Take a look around the website. If you need financial advice then you should use a qualified financial advisor.
Guarantor loans are one type of unsecured loan that could help you get finance when your borrowing history is less than perfect. Guarantor loans require you to provide someone to back you in your application and to stand behind your debt and repayments should you fail to do so.
They work on the principle that if you can find someone who trusts you to pay off the debt then your credit score (i.e. the measure of risk of lending to you based on your historic behaviour) is much less relevant.
In addition to getting you the borrowing you need they offer you the chance to improve/rebuild your credit rating. Each time you make a monthly repayment on time and in full this good news is added to your file so helping to dilute the bad news that is already on there.
As you can see from the comparison of loan options above there is no single type of product - just a number of alternatives that may suit people who have issues in their borrowing file. So, whether a loan is "safe" or not depends on the type of product in question.
So, what would be the worst case consequences of not keeping up your loan repayments:
In the case of any type of finance you should never borrow more than you can afford to repay. Lenders are required to conduct affordability tests prior to lending any money. But as a borrower you are obliged to repay on the terms agreed. If you fail to there are always going to be some consequences. At the very least your borrowing rating will be downgraded making borrowing harder in the future.
Your borrowing history and your credit file is an aggregation of all your interactions with finance companies and other businesses who let you borrow (e.g. utility companies and phone companies). If you have experienced money problems and this has led to you missing loan repayments or being late paying some bills then your file will be tarnished for a while.
If you were to need to borrow more in this situation then it may be more difficult to. So, a lender who is more tolerant or a financing product that is more tolerant of a poor credit history is likely to be a solution. All the loans on this page are tolerant of a less than perfect history. The loans may be more expensive than you are used to but this will be the case while you are seen as a higher risk. However, if you pay off any new borrowing on time and in full your credit history will be improved and rates you pay in the future are likely to be lower.
The amount you can borrow depends on:
For small sums of money (say £500, £1000, £2000) there are a number of alternative products worth considering:
As the sum you need increases (e.g. £3000, £4000, £5000 and upwards) the options change:
Regardless of the style of finance it is always subject to affordability and a lender's judgement about risk. The latter could be assessed by a credit score. This will also affect the cost of the loan.
The key advantage is that just when you think you can't get finance you can - all the finance products above are built with borrowing issues in mind. You don't need perfect credit to get what you need.
Without these sorts of loan available people who have an adverse histories would never be able to borrow again and they would never be able to prove that they could manage their finances. The reality is that credit issues can hit anyone at any time due to a change of circumstances (e.g. moving house, changing job, becoming unemployed, etc).
The phrase "bad credit" is bandied about a lot. But at the heart of this phrase is the reality that someone has had a problem managing the borrowing they have previously been allowed. It could be a few missed payments or something more serious like a default notice or a CCJ. For a new lender deciding whether to lend they will see people with bad credit histories as more risky.
A lender could choose not to lend or they could choose to do so at an interest rate that is higher than normal to help offset the higher risk. It is this higher interest charge or APR that is perhaps the major disadvantage. But in addition a borrower could be requested to offer a guarantor or an asset as security.
The comparison of poor credit loans above shows the representative APR% for each. So, do you consider these to be low interest loans? Perhaps not, but the interest rate charged by the lenders is adjusted to account for the extra risk they perceive. A person's loan file may show them to be unreliable when it comes to repayment so a lender has two choices:
If you need to borrow then you should investigate which of these options suits your circumstances. Then narrow the options further based on the loan amount you want and the potential total repayment cost. Two rules for borrowing always apply:
This all depends on which type of loan you look at. You can compare the loans above to judge what is right for you but in general you can cluster loans as follows:
Short Term (up to 12 months) - Payday loans, Doorstep loans
Medium Term (1 - 3 years) - Instalment loans, Guarantor loans, Personal loans, Logbook loans, Car Finance
Long Term (3+ years) - Personal loans, Homeowner loans
Technically you can use any loan to pay off other debts - but don't forget that this is simply replacing one form of debt with another. So, should you do it? It can on occasions make sense to consolidate your debts to reduce the interest costs overall. Or if you're struggling to make the repayments over a short time frame making them over a long time frame might make them more affordable (in the context of your monthly budget). But be careful as extending the period of repayment could make you pay more interest in the long run.
To work this out what is best will take some work on your part. You need to work out what the costs are under your current arrangements and look at the best alternative. Also take care if your plan involves swapping unsecured debt for secured debt as you risk losing the asset you've as security if you fail to keep up repayments.
If necessary take advice from a qualified financial advisor.
If you use a homeowner loan as your adverse credit loan then ultimately your home would be at risk if you failed to make payments on time and/or paid off the loan in full on time. This is because as a form of secured loan you have offered your house as the security.
In some extreme circumstances an unsecured lender could obtain a court order to take possession of some of your assets if you didn't repay what you had borrowed. However, this is rare and other solutions would be negotiated before this step was taken.
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