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If you have a poor credit rating, you may ask yourself whether or not it’s easy to get a loan with bad credit. Or perhaps you’ve been turned down by a few lenders, and believe that your credit score is stopping you from getting a loan.
But there are a number of loan options available even if you have got a less than perfect credit score. So if you’re looking for a loan with bad credit, where’s the best place to start?
When it comes to bad credit loans, there are a variety of lenders that specialise in this type of loan. Having a poor credit rating is more common than you may think. Most people in the UK have a ‘fair’ credit score, rather than ‘good’ or ‘excellent’. You can compare your score with others in your age range and region by using Experian’s average credit score map.
Bad credit lenders understand that your credit score isn’t always a good representation of how you manage your money. As information can stay on your credit file for up to six years, a late or missed payment can impact your chances of borrowing for a long time. And often these negative marks on your credit report are due to factors outside your control. This could be something like losing your job or a difficult life event.
While more traditional lenders can penalise you for adverse information on your credit file, bad credit lenders are more concerned about your ability to repay the loan. Your credit score is usually less important than factors such as your income and expenditure, and your employment history. These tend to be better indicators of your money management and the risk of lending than your credit score.
Overall, as long as you meet the following criteria, you should be able to take out a loan. Even if you have really bad credit history.
Bad credit loans can either be secured or unsecured. There are pros and cons to each type of loan – which one you choose will depend on your personal circumstances. So what is the difference between a secured and unsecured loan?
The most common type of secured loan is a mortgage. The loan is secured against the value of your property. Your home therefore acts as collateral should you be unable to keep to the repayments of your mortgage.
The interest rates for secured loans are usually much lower than with unsecured loans, as the lender has less risk. Even if you were unable to repay the loan, they would not be at a disadvantage, as they could repossess your property. So as a borrower, you need to consider whether you are prepared to use something as collateral for your loan.
Secured loans can be more difficult to obtain if you have bad credit. But there are always options available, even with a low credit score. Specialist lenders, such as bad credit mortgage lenders, are happy to work with you even if your loan application is turned down by a bank or other traditional lender.
Unlike a secured loan, you don’t need collateral for an unsecured loan. The criteria is therefore based on your credit history and current employment status. Secured loans are commonly referred to as personal loans. They can be broken down into many other categories, such as short term loans, guarantor loans and payday loans.
The disadvantage of unsecured loans is that the interest rates can be higher than secured loans. However, you have no risk of losing your property should you default on the loan. And as unsecured loans are usually shorter term than secured loans, you may actually end up paying less interest overall.
People with bad credit often choose to take out unsecured personal loans, as they are more easily accessible. There are numerous direct lenders that offer unsecured bad credit loans, who believe that your credit history should not determine your credit future.
Unfortunately no lender can guarantee that they’ll be able to approve every application. But you should be able to improve your chances of loan approval by using a broker service. Not only will a broker ensure that you meet all the lending criteria, but by only making a few applications you can also help protect your credit score. Submitting too many loan applications in a short period of time can leave a footprint on your credit file, which can then lower your credit score.
So if you’re looking to borrow money with a poor credit history, using a broker service like My Financial Broker can increase your chances of being accepted for a loan. And best of all, our services are completely free!