What are Bad Credit Loans?
Bad credit loans are a type of loan specifically suited to individuals that have a bad credit rating and may struggle to get accepted for credit or finance elsewhere.
There are many different reasons why you may be suffering from bad credit, issues ranging from missing a certain payment, going overdrawn on your bank account or even simply failing to pay a bill on time. In the digital age that we live in, it seems that nothing goes undetected when it comes to late repayment, especially with credit history companies such as Experian, every little detail regarding your credit history is logged and accessible to many UK direct lenders.
There are a huge number of reasons that can contribute to a bad credit score, missing payments can have an effect on your credit score especially if you are regularly missing bill payments.
People with bad credit are often turned away numerous times when they want to borrow money or when it comes to applying for a loan or any form of finance. This is because the majority of UK loans lenders will base their decision purely on your credit history. So if you have previously defaulted on a bill payment, this will scare many lenders off from giving you a loan in the fear that you will default on a loan repayment and fail to repay the full cost of your loan back in the agreed time.
Only a small handful of lenders will offer loans with bad credit. Bad credit loans are loans that are specifically suited to people with bad credit, these types of loans may come with a slightly higher interest rate and more strict terms and conditions should you fail to make a payment. These direct lenders will also review your credit history file to see what borrowing history that you have had and like many other payday loans direct lenders, they may feel that you can not realistically keep up with the monthly repayments and may choose to reject your loan application.
There are a number of things that loans on bad credit lenders will look for when it comes to assessing your application, these include:
Your monthly income and expenditure – If a lender feels that you have a consistent form of income and enough disposable cash left at the end of each month to repay loan repayments, this could improve your chances of getting a loan for bad credit.
Your current employment status and history – If you have a credit history and are also unemployed, applying for these loans is probably not the correct decision. Lenders will likely reject your loan application due to the fact that you are currently unemployed without a source of income and therefore will not be able to afford the loan repayments. However some direct lenders offer loans for unemployed people.
Your Credit History – If you are specifically applying for a bad credit loan, the chances are a direct lender will already know that you have a low credit score, even before they have reviewed your credit file. Although all direct lenders need to perform a credit check, this does not mean that given your bad credit score your application will be rejected. Instead a bad credit loan direct lenders may choose to offer you a loan or alternative financial products suited for your needs.
Although not every individual will have a credit history, especially if you have never borrowed before, there are still other options available. Many students typically do not have a credit history due to the fact that they have just entered their adult life and therefore may not have taken out any loan or form of finance before. Short term student borrowing has increased in recent years with many bad/no credit lenders offering financial products suited to students who fall into this category.
What type of loans can i apply for with bad credit?
If you have bad credit you may struggle to get accepted for traditional type of loans such as personal loans and unsecured loans offered by many banks and direct lenders.However, even with bad credit there are a number of loan options that may still be available to you such as the following:
If you have poor credit, an unsecured personal loan may still be available to you. These loans are 'unsecured,' meaning that you don't have to put forward collateral (such as the title to your car or another valuable asset) to get a loan. Because the loan isn't given based on collateral securing the loan, lenders instead approve these loans another way: loans are approved only if the lender determines that you are most likely going to be capable of paying back the loan. A benefit of this type of loan is that you often have more flexible terms for repayment, and some lenders even allow a respite, or holiday, wherein you won't have to repay for a certain amount of time. In some cases, you may even get other rewards when you've completed repayment.
Loans with a Guarantor
Much like getting a co-signer when renting an apartment or leasing a vehicle when you have poor or little credit established, some loans allow for a guarantor. In essence, this allows lenders to increase their chances of getting repayment on the loan should the borrower be unable to do so. While this does allow borrowers to increase their chances of getting a loan, there are some stipulations. First, most lenders will require that the guarantor has a certain level of credit, and ability to repay the loan. The guarantor cannot be financially linked to you, such as your spouse or a joint bank account holder with you. They will also require the guarantor to be a full time worker, and adult 18 or older.
Peer to peer loans are becoming more popular, since borrowers don't have to rely on a good credit score or bank to get a loan. There are many peer lending platforms that connect individual lenders (or occasionally small lending groups) with prospective borrowers. These loans are often more flexible and offer lower rates, since both buyer and lender agree on an interest rate and repayment plan before proceeding with the loan. However, you will still have to have a steady income, a bank account, and in most cases, be 21 or older.
Payday and short term loans
Because these type of loans are usually smaller in value and are only borrowed over a short period of time, a directly lender is more likely to approve your loan application as the total amount of the loan will be smaller when compared to a personal loan. With payday loans, it is essential to only borrow a small amount, and repay the loan in full on the agreed date, usually your next payday. Short terms loans are similar to payday loans in the way that they are smaller in value, however short term loans can be repaid in separate monthly repayments.
Is a bad credit loan suitable for me?
If you have a bad credit history then a bad credit loan is probably the likeliest option for you to receive additional funds. Bad credit loans are specifically designed for people with a poor credit history and are only provided by a number of lenders. Bad credit payday loans usually come with a slightly higher interest rate and repayment terms due to the risk of a lender loosing their money if someone is unable to repay their loan.
Although the interest rate on a number of bad credit loans may be higher than the traditional payday loan, the cost of these types of loans can usually be spread out over a longer period of time in order to reduce the monthly payments. By spreading out the cost of your loan by another couple of months, the monthly repayment fees will also get smaller, meaning that they become more manageable for people to pay back.
As the name suggests, bad credit loans are a source of finance for people suffering with a poor credit history who are desperately in need of some additional funds. Only you will know if it is a suitable option, there are many different types of financial products available on the market designed for people with poor credit, comparing the different products to find the best available deal for you is something that we will always recommend.
Bad credit loans alternatives include products such as credit cards, secured loans, logbook loans and even remortgaging. Many direct lenders in the UK will offer bad credit loans with no guarantor, meaning that you will not need someone to act as a sort of back up for you should you fail to repay your loan. This means that you will be able to get your loan despite your credit, and will be able to access it quickly.
The disadvantages of a guarantor loan is that if you fail to repay your loan, the person that acted on your behalf to help you get the loan will be fully liable to repay any costs that you can not afford to payback. For this reason, it may be difficult to get one of these loans, if only because you need someone to assist you.
Do you offer bad credit loans no credit check?
All UK direct lenders will need to perform a credit history check to see if you are eligible for a loan. If you are specifically applying for a bad credit loan, the lender will already know that you have a poor credit history, so carrying out a credit check will not uncover any shocking surprises to the lender. You may not be able to get a personal loan with a lower credit score, but having a low credit score is expected with a bad credit loan.
By law all UK bad credit loans lenders will need to carry out some form of credit history check. By doing this, it gives the lender a detailed overview of your borrowing history and also any debts that may be associated to you. This lets them know whether or not you will pay the loan back, since these are still loans after all.
Payday pixie will not carry out any form of credit check that may harm your credit score, however if we match you to a lender it is likely that they will perform a full credit history check. The likelihood of finding a bad credit loan with no credit check are extremely slim due to the fact that no UK lender will give you money without being 100% sure that you can afford to repay the amount without falling further into debt. The only way to be 100% sure of this is to carry out a credit check.
How do i apply for bad credit payday loans?
These loans are a smaller type of short term loan that is usually borrowed for a shorter amount of time when compared to a regular personal loan. Many payday lenders offer short term bad credit payday loans with the process of applying being very similar to all other loan options. For example an individual will still need to fill out an application form and undergo a credit history check to ensure that they are able to repay the full cost of the loan.
Payday loans for bad credit usually have a higher interest rate when compared to other personal loan. This is because payday loans in general typically have higher interest rates, as do bad credit loans. So when a payday loan and a bad credit loan are added together the results include higher interest rates and a stricter repayment process.
What happens if my application is rejected?
People with bad credit will often find that their online loan applications are constantly being rejected. If your application is rejected this could further harm your credit score, especially if you have been rejected by multiple direct lenders within a short period of time. if your application is rejected, we may choose to display some other financial products that may be of interest to you. These products are all regulated by the financial authority, FCA (Financial Conduct Authority). They are authorised and regulated and designed to help you try and improve your credit score. Alternatively if you do not wish to proceed with any of our recommendations you can apply with another direct lender, although applying again may affect your credit score and leave some form of credit footprint.
How can i improve my bad credit score?
The easiest and fastest way to improve your credit score is to pay off of your outstanding debt. Other ways in which you can improve your credit score is by maintaining a consistent repayment schedule for all of your monthly bills and outgoings such as phone bills, rent and any other loan repayments. You do not have to completely clear your debts in order to improve your credit score, as long as you are making repayments on time, this will help your overall credit score.Try to be consistent and reliable in making your payments, making sure to pay the full amount on time.
Many people don't know this but registering to vote and being on the electoral roll will make it easier for you to be approved for credit
There are a number of handy tools that can be used in order to help you improve your credit score. Experian is a leading credit score company who will provide you with a full overview of what is damaging your credit score. By having a full overview of what is damaging your credit score, you are able to work towards improving it by focusing on the points highlighted in your credit file. Use these tools to take a look and see if there are any incorrect bills or charges that may be damaging your score, or that you may be able to pay off quickly enough to affect your score. It also might happen that something is in your name that you have no record of, which is why you should be sure to keep an eye on your credit score to avoid any possible problems.
Which Direct Lenders offer loans for bad credit?
Typically the majority of direct lenders will be reluctant to offer a loan to someone who has bad credit, however there are a number of lenders that will offer loans specifically suited to individuals with bad credit. Traditional lenders such as banks and other personal loan lenders are unlikely to be able to offer anyone with bad credit a loan, as these type of lenders usually only offer loans of a larger value.
In order to find out which lenders offer loans for bad credit, the internet is the best source of information. By searching for bad credit loans you will find that only the direct lenders that offer bad credit loans will appear in the search results. It is also important to research the lender to ensure that they are fully FCA regulated before you apply for a loan with them.
How do i apply for poor credit loans online?
To apply for a loan online with any UK Direct Lender, you will be asked for the following information:
- Loan Amount you wish to borrow
- Personal Details
- Date of Birth (to confirm you are over 18 Years of age)
- Monthly Salary and Outgoings
- Bank details (Where you want your loan to be paid into)
- Employment history
What is considered a bad credit rating?
A bad credit score is considered to be anywhere between 300 and 579 out of a possible 999, based on the experian credit score report. However there are a number of credit reporting companies that have slightly different metrics, for example the noddle credit score report only goes up to a maximum of 710.