You may assume that once you have a bad credit rating, you won’t be able to borrow any more money until it improves. This is not always the case.
What it does mean is that you won’t be able to access the best deals on the market as lenders will cover the risk of lending to people with bad credit by offering higher interest rates. But, repaying a new loan in full and on time will start to repair your credit score in order that you will be able to apply for better credit terms in the future. Bad credit loans are usually delivered quite quickly, sometimes within 24 hours of being accepted.
Not every lender looks solely at your credit score. They will use other factors to determine whether you are able to repay the loan, such as your current finances. Or they might ask you to repay the loan in a shorter amount of time than is normal.
It’s true that there are fewer options for people with bad credit when it comes to taking out a loan, and your interest rates will almost always be higher. This is why you should always carry out a bad credit loans comparison to ensure that you’re still getting the best deal.
Secured loans can also be known as homeowner loans as they are typically secured against your home. Some lenders will also allow you to secure the loan against other collateral such as your car. This means that if you start to miss any payments, the lender can seize the collateral against which you have taken out the loan.
Personal loans may still be available from certain lenders, but you will pay a higher interest rate and will have less of the market to choose from. The good thing about these loans is that you won’t need to secure the loan against any of your assets.
Guarantor loans require someone else to agree to make repayments if you miss them. In most cases, this person will be a family member and they will need to have a good credit score of their own. This type of loan protects your collateral but you should always consider the implications before you enter into an agreement like this.
Peer-to-peer loans are where you borrow money from other people, not a lender. This might enable you to borrow at a lower rate, or at a higher amount than with a traditional lender. But, you will need to get through credit checks before you can do so.
The information that you will need before applying for a loan is as follows:
– The amount you need to borrow. Interest rates may be lower if you borrow a higher amount but ensure that the repayments are affordable.
– The length of time needed to repay this amount. Consider the amount that you can afford to repay each month. Extending the loan into smaller amounts over a longer period of time will make it more affordable but it will also mean that you’ll be paying more in interest.
– Whether it is affordable. It’s likely that your credit has been damaged by biting off more than you could chew in the past. Never enter into a loan agreement if you think that you will struggle at all to make the repayments every month.
If you have been rejected for loans in the past, it’s important to understand the reasons for this before you compare bad credit loans. The most likely reason for having been rejected in the past is, of course, a bad credit rating. This rating alerts lenders to the fact that your financial situation is not, or was not, ideal. It tells them that you might have problems with repayments.
If you haven’t used credit much in the past, which could be because you’re young or have been living in another country, you won’t have a sufficiently detailed credit history and this can impact your eligibility.
And conversely, if you have a lot of lines of credit that you are currently repaying, this can suggest that you would struggle to take on more credit.
If you have changed jobs frequently or have a number of gaps in your employment history, this can suggest that you may be a higher risk.
Applications for larger loans could be rejected if the lender decides that your income level is too low to guarantee that you will be able to make consistent and full repayments.
If the type of loan for which you are applying requires assets to be secured against it, you will need to have sufficient assets to cover the amount. If not, your application will probably be rejected.
Another common reason for loan applications being rejected is a simple error on the application. This might seem harmless enough but since rejections are noted on your credit file, they can make your score deteriorate further and render any future applications more likely to be rejected.
It’s a good idea to consider the pros and cons of various products by performing a bad credit loans comparison.
On a positive note, a successful application will ensure that you will have access to cash, usually quickly, which will be a lifeline if you have emergency or unforeseen costs that need to be met.
On the downside, you will almost certainly be charged a higher interest rate than those with a better credit score, meaning that overall the loan will cost you more. If the loan is secured against any of your assets, your lender will take this asset if you fail to make repayments.
The requirements are broadly the same as for any other loan. You must be 18 years old or over and a permanent UK resident. You will also need to provide evidence that you hold a current account and will need to explain how you are able to make repayments from your income.