Loans For Bad Credit

Is your credit history preventing you from obtaining loans?

Don't fret, you're not alone in this. Many people experience financial difficulty at points in their lives, which may mean they have a low credit score. However, this doesn't always mean that you won’t be able to get a loan.

We’ll discuss what bad credit means, how it can impact your ability to be approved for a loan, and the array of products available to those with a low credit score.

What is the best way to find out if I have bad credit?

Bad credit is defined as a low credit score or a history of missed payments. Essentially, it means that lenders might regard you as a higher-risk borrower. As a result, they are hesitant to lend you money if you apply for a loan.

When applying for a loan, the first step is to find out if you have bad credit. To do this, you can easily check your credit score online. 

Thankfully, Experian and TransUnion offer a free credit reporting service. Once you’ve added some basic personal details, your report will reflect your credit score. It will also be able to show you any debts you currently owe, your repayment history, and other financial information that might interest you.

There are a few different factors which can harm your credit score.

These include:

• Repeated delays in payments on loans, credit cards, and Buy Now Pay Later debts, or missing payments altogether

• Having consistently high levels of debt, including if you’re close to maxing out credit cards

• Defaulting on any loans. This means that you haven't kept up with your repayment plan for a long period of time

• Declaring bankruptcy

• Making too many applications for credit in a short period of time. This may indicate to lenders that you are taking on more debt than you can repay

If any of these factors have contributed to your credit score dipping below 600, some lenders may consider you to have bad credit. This is, however, a generalisation. Each lender has different standards and criteria for determining whether you are a high-risk borrower. This means it’s always a good idea to shop around before selecting a lender to apply for credit.

A series of seemingly minor actions, such as applying for a credit card or missing one payment, can influence your credit score negatively. It’s, therefore, very important to stay on top of your finances and make payments on time. Credit reporting can sometimes reflect errors too, so regularly checking your credit report for any inaccuracies means you will not be unfairly penalised for actions that aren’t your fault. 

Anybody with bad credit can increase the chances of their loan application being accepted by having a consistently proactive attitude to keeping their finances healthy.

What are bad credit loans?

If you’re somebody who has a low credit score or a history of making late repayments, securing a loan can be a daunting prospect, as many lenders will decline loan applications on this basis. Fortunately, bad credit loans exist to offer a solution for those in this credit category. They’re specially designed for people who have been turned down for loans or wouldn’t apply otherwise due to their credit score.

Usually, bad credit loans carry higher interest rates and fees than conventional loans, as lenders want to ensure their customers will repay. However, despite the expense, they can be a lifeline for those who need access to cash, even though their credit history isn’t the best.

What 'bad credit loans' are available?

There are a few different types of bad credit loans available to those who have a poor credit history. The most common among these loans are:

· Payday Loans - Payday loans are offered to customers on a short-term basis to be repaid on their upcoming payday. They’re aimed at those who need help to cover unexpected costs quickly. Payday loans are available to people with bad credit history and can be accessed in a day or two in most cases. Whilst this type of loan can seem convenient, they normally carry extremely high-interest rates and associated fees, making them an expensive option for those needing fast cash.

· Secured Loans - Secured loans require a borrower to put up collateral, such as a car or home equity, in order to obtain their cash. For this reason, lenders are often more comfortable lending secured loans to those with bad credit, as the collateral guarantees the funds will be repaid either by the customer or by seizing the collateral.

This type of loan typically carries lower interest rates and offers customers extended repayment terms compared to unsecured loans. However, you should note that the collateral you've offered the lender could be lost if you fail to pay back the loan.

· Guarantor Loans - Guarantor loans require another person with a good credit history to co-sign on your loan application to a lender. It could be anyone; prospective borrowers usually ask a family member or friend for assistance.

The person who agrees to be the guarantor commits to making any repayments if the person taking out the loan falls behind. As a third-party individual guarantees the loan, lenders are usually more prepared to offer this option to those with a poor credit score.

What happens if my loan application gets rejected?

If you have a poor credit record and you're then rejected for a credit application you were relying on, this can be a challenging situation. However, before giving up, it's wise to spend time trying to understand why you were rejected in the first place and how you can avoid this happening again in the future.

If a lender rejects your credit application on the grounds that your credit score isn’t high enough, you can take a few different steps to improve it so that you get accepted for credit next time. This could include things like paying off existing debts you might have, making all credit repayments on time, and holding off from applying for any more credit in the near future.

If you’re rejected for credit because you don’t have very much credit history, it’s a good idea to take action to build your score so you appear responsible to lenders. You can take many simple actions to build a credit record, such as registering to vote, obtaining a credit card and using it responsibly, or taking out a new phone contract and making regular, prompt payments. By maintaining good repayment behaviour, you can begin to build a positive credit history, and lenders will view you as a good prospective borrower.

You may also be rejected for credit because of other factors which can have an impact on eligibility. For example, your income and employment status play a part in some lenders’ decision-making. Before accepting your loan application, you may need to boost your income or find a more stable job.

Whatever your situation, you are always able to rebuild your credit so you can access loan options in the future.

What are the best ways for someone with bad credit to get better rates and higher credit limits?

Getting better loans and higher spending limits can be difficult when you have bad credit. However, improving your chances can be relatively straightforward.

As with any financial product, it’s vital to shop around if you want to get the best deal for yourself. The first offer you receive might be relieving if you have a poor credit history. However, taking your time to scope out any options available and ensuring you compare rates and borrowing terms will leave you in the best possible position to get a good deal with manageable repayment terms.

A few lenders on the market specialise in helping borrowers with a low credit score access loan products, so it’s wise to investigate this route of obtaining credit.

The simplest way to get better rates and higher credit limits is to improve your credit score. Doing so may mean a need to change your financial habits, but obtaining better credit deals will be much easier once you take this step.

As mentioned earlier, if you're finding it hard to get a loan application accepted on your own, getting a guarantor with a high credit score can help boost your chances. This can help you get better rates and loan terms whilst also allowing you to build on your credit score if you make all your repayments on time.

What’s the bottom line?

Poor credit history can make it hard for individuals to access any credit products they need. However, it doesn’t have to be the end of the road, and there are many positive steps which you can take to change your luck.

By understanding what bad credit is and figuring out if you have it, you can proactively improve your score, putting yourself in a favourable position with lenders you approach in the future.

Ultimately, if your credit history isn’t the best, don't lose hope. By making minor changes to your financial behaviour, you can improve your credit rating and your chances of obtaining any much-needed loans.