It can feel like an uphill struggle trying to get a loan if you have bad credit.
But even if you’ve made mistakes in the past with handling your finances, that doesn’t mean you can’t get a loan.
Although there might not be the same choice of loans for someone with bad credit as for a borrower with a flawless credit rating, there are still plenty of options within easy reach.
However, easy doesn’t always equal best. Opting for the most straightforward route could lead to you taking out an expensive nightmare of a loan which could end up damaging your credit further.
To help you make an informed decision, we’ve compared five different, easy ways to apply for a loan with bad credit.
How Likely Is It For The Average Brit To Be Refused Credit?
|Type of loan||Women||Men|
5 Easy Ways To Get A Loan With Bad Credit
1 – Bad Credit Card
These credit cards are aimed specifically at people with a patchy credit history, and if used properly, can be an excellent way to borrow money and rebuild your credit. Some lenders even offer an interest-free introductory period, which can make these cards a very affordable borrowing option.
Many lenders have online applications, and if you’re accepted, will send your card through the post. Depending on your income and score, it is possible to access a credit limit of up to £3000 with some providers.
Because these cards are aimed at people with poor credit histories, they can come with steep interest rates. To avoid paying through the nose, you’ll need to treat your card as though it were a loan and pay off your balance in full each month,
Some providers advertise an interest-free introductory period, which makes it possible to avoid paying any fees at all if you pay off your balance in full before the end of the offer.
Credit cards can have a strong influence on your credit rating, so it is important to pay off your balance each month. If you don’t, or only pay the minimum, you could damage your score further.
However, if you make regular, healthy payments, there is a good chance that your credit rating will improve over time.
- Pros: It’s possible to get 0% interest for the first few months; can help rebuild credit if you manage repayments properly; generous credit limits are available with some lenders
- Cons: Interest rates on outstanding balance can be high; if you don’t keep up with repayments your credit rating will take a hit; requires discipline as there’s no fixed term to the loan
2 – Short Term Loan Or Payday Loan
Short term loans include a range of unsecured borrowing options, from so ‘no credit check’ loans to payday loans. These are perhaps the easiest of the options to access but tend to have some of the highest fees. You can apply for a short term loan online and if accepted, could have your cash in a matter of hours.
Unlike many traditional lenders, these providers encourage applications from consumers with bad credit ratings. They tend to charge very high-interest rates and limit borrowing to smaller amounts. Most short-term loans are for a few hundred pounds, although it is possible to borrow up to several thousand.
With payday loans, you repay the amount you borrowed in full, plus interest, within a month or on your next payday. If you’re late to make a repayment, you could face penalty fees or further debt.
Longer short-term loans may stretch over several months. As with payday loans, it is important to keep up with repayments, or you may be charged penalty fees and asked to ‘rollover’ your debt.
This is when you agree to take out a new loan to cover the unpaid costs from the old one and usually involves administration fees.
- Pros: Almost guaranteed to be accepted; very quick and easy to apply for
- Cons: Very high-interest rates; Due to the short loan term it can be difficult to payback.
We have written extensively about short terms loans and payday loans, and you can read the details here, ‘Our Guide To Short Term Loans & Credit Checks‘.
3 – Peer-to-peer Loan
Peer-to-peer lending is a relatively new but growing phenomenon.
Providers pair up people looking to borrow with individuals who are willing to lend. You can apply for a peer-to-peer loan online and potentially be granted the cash in a matter of hours.
This type of lending is not specifically aimed at people with bad credit. Still, providers can afford to be more flexible than banks and traditional institutions because every investor (lender) who uses the platform decides how much risk they are willing to take on.
Loans from peer-to-peer lenders can have high-interest rates if your credit rating is poor, to help offset the risk that the lenders are taking with their money. However, these rates still tend to be lower than what a borrower with bad credit would be charged by mainstream lenders.
Even though these loans are unsecured, not keeping up with repayments could damage your credit score and lead to your loan being sold on to debt collectors.
- Pros: Can be quick and easy to arrange; may be more affordable than mainstream lenders
- Cons: Interest rates can still be high
4 – Guarantor Loan
Guarantor loans can help people with bad credit or low-income access to better interest rates and borrow more money. They can be a useful way to help rebuild credit without spending a fortune on interest.
However, they are not without risk. With a guarantor loan, someone else who has a higher income and better credit score than the applicant co-signs the loan, agreeing to pay if the borrower defaults.
These loans are normally available from high-street banks as well as a handful of online providers. To be a guarantor in the UK, you must be over 21 years old at the start of the loan, under 80 years old at the end of the loan and have both a regular income and good credit. In some cases, the guarantor may offer an asset (such as their home) as security.
Though the assurance that the guarantor provides, it is possible to borrow money at much lower interest rates than you would have access to as a sole bad-credit customer.
However, if you don’t keep up with payments or default on your loan, your guarantor could end up paying the price. When they sign the loan, you become financially linked.
This means that is you are late with any payments it could appear on their credit report- even if you ended up financing the late payment yourself.
- Pros: Can enable people with bad credit to borrow at affordable rates; you may be able to borrow more money with a guarantor
- Cons: If you don’t pay back on time or default on loan, your guarantor could face financial problems; your relationship could be put under strain if you don’t keep up with repayments.
Main Reasons For Being Refused Credit
|Reason||Percentage of rejected applicants|
|Poor Credit History||40%|
|Having no credit history||17%|
|Too many credit searches in last 6 months||15%|
|A credit report is linked to an ex-partner who has bad credit||10%|
|Not sure why rejected||9%|
5 – Secured Loans
Secured loans are loans which use your property or other belongings as security. While they are perfectly legitimate, these loans should not be entered into lightly! If you fall behind on payments, the lender has the right to sell your property to recover their money.
Two common variations of secured lending are logbook loans and homeowner loans. You can apply for both online. In a logbook loan, the lender’s money is secured against your vehicle.
You can normally borrow up to 50% of your car’s value and can continue to use it while you pay off the loan.
A homeowners loan, as the name suggests, is secured against your home.
How much you can borrow depends on how much of your mortgage you have paid off anyhow much the lender believes you can afford to repay.
- Pros: As long as you have the right assets, you can get a secured loan regardless of your credit rating
- Cons: If you fall behind on payments the lender has the right to sell your belongings to recover their money
Things To Look Out For When Applying For A Loan
All of these options are potentially quick and easy ways to access credit, but the exact terms of any loan will vary depending on the lender.
Before taking out a loan, remember to check with your lender exactly what is expected from you. It pays to consider:
It is important to check how much will the loan costs above the money you’re borrowing. Bad credit loans tend to have high-interest rates, which can really add to your repayments.
Many loans also include fees to set up. Check the APR to see how much interest and fees cost all-in on a monthly basis.
How Long You Have To Pay It Back
Ensure you know how long you’ll be needing to pay for. Shortening your loan term could help to reduce its overall costs because you’ll be charged interest for a shorter amount of time.
At the same time, you need to make sure you can afford your repayments, so avoid the temptation to shorten your loan to the point where your monthly budget is at breaking point.
It is always a good idea to look for loans with flexible terms, and if you have bad credit, this is even more important. If you have a history of not managing your debts well, flexible repayment terms could end up saving you a great deal of money and stress.
Look for providers with lower penalty fees for late payment or who could let you extend your loan term if you find yourself struggling to keep up with repayments.
How Can Flexy Loans Help?
Here at Flexy Loans, we have partnered with some of the UK’s leading Lenders.
They have already helped thousands of people get loans already, and they can do the same for you.
Choosing a loan broker like us (we don’t charge any fees) means our application process matches you with the best loan available to you. All lenders we recommend are regulated by the FCA, which gives you an additional layer of protection.
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