Seeking financial support is something that a lot of people do when faced with a monetary crisis. Some people like to look at credit cards or overdrafts, but not everyone has the credit to receive an approved application. Generally, if this is the case, then you might be better off applying for something that takes this into consideration like a payday loan for bad credit. So, if you know that your credit score isn’t the best, then keep reading and we’ll strip bad credit lending down to the very basics.
Table of Contents
What Is Bad Credit?
Bad credit isn’t defined by one single number or rating. In fact, a bad credit score will totally depend on your current situation and the credit reference agency that is used to check it. Each agency will use a slightly different rating system, so it can all come down to what your score is at that specific agency. With that being said, it’s generally thought that the lower your score, the worse it is, so find out what a good rating is for your chosen agency and see how it compares. Bad credit can happen to anyone, and it’s very easy to do. Missing bills on a regular basis, setting up lots of new bank accounts, and maxing out other forms of credit can all have a detrimental impact on your credit score. So, try to avoid doing things that you know will actively lower your score.
What Is A Bad Credit Loan?
There are different types of bad credit loan that you can get, and essentially, they’re designed to help people with low credit scores still receive the financial support they need. The types of bad credit loan are as follows: unsecured personal loan, secured loan, guarantor loan, and peer to peer loan. All of these will have different criteria and terms to follow, so make sure you fully understand the type you’re applying for before committing to anything. An unsecured loan is where the borrowed money isn’t secured against any sort of assets like your house or your car. The lenders will base their decision purely on things like your income, credit history etc. If you’re unable to make the repayments, you’ll most likely face penalty fees and can even be pulled into court. A secured loan is where you do secure the borrowed money against a personal asset. This means that if you can’t make your repayments, your assets can be seized as collateral.
A guarantor loan is where you have to use a secondary person as your back up, and they will become legally responsible for your repayments if you can’t make them. The guarantor normally has to have a good credit history, be ages over 21, and be working full time. They aren’t allowed to be a partner or spouse as you aren’t allowed to share a bank account with them. Finally, a peer to peer loan allows you to borrow money without going to a regular lender. Instead, you borrow from an individual or a group that are able to provide you with lower interest rates than banks. Some people with bad credit prefer these as the interest rate tends to be much more manageable.
Who Is Eligible?
Eligibilty for bad credit lending is quite similar to regular lending. For instance, you must be 18 or over, hold a UK current bank account, and be a UK resident for more than 3 years. You will find that most lenders ask for you not to have been bankrupt within the last 6 years too. The criteria will most likely change between different lenders, so make sure you read it all through properly before applying. You don’t want to get an unnecessary rejection, as this will leave a mark on your credit file. So, be sure to carefully read through all the criteria before you apply, and you should hopefully increase your chances of approval.
Should I Improve My Credit Before Applying?
While you might think that it’s impossible to increase your credit score before applying for a loan, this simply isn’t true. Little things like registering for the electoral roll and making sure there aren’t any errors on your report can help to boost it, even by a little bit. These changes might not be enough to make you eligible for a regular loan, but they could work in your favour when you apply for a bad credit one. Bad credit doesn’t mean that you can’t access finance when you need it. In fact, there are lots of ways you can borrow credit and still have a low credit rating. You just need to know where to look! So, if you’re thinking about applying for financial lending but are worried that your credit score will damage your chances, make sure you take a look at bad credit lending instead. You’ll be surprised at how many options are actually available to you.
