It can be unfair at times, but the truth is that your credit score and report pretty much determines your credibility as a borrowing party, to all lenders operating within the UK. Fortunately, it is possible to get a loan even if you have bad credit, but they usually come with a few stipulations. Before taking any bad credit loans, go through the following and find out if you are fully aware of everything that you should be.
There is a Difference Between Bad Credit and No Credit
No credit applies to someone who has never taken a single loan on record, or at least not one in their own name. It’s a seemingly neutral position to be in, but in practice, it’s not so neutral at all!
When you do not have any credit history, it could prove hard to get a loan, since the lenders have no idea regarding your approach to pay back debts. However, financial stability and/or financial condition can make a difference here.
A bad credit score, on the other hand, marks your debt profile as unreliable to all creditors. It usually occurs when you have been behind payment on installments, or have failed to pay back a debt in due time. Depending on the markers (reasons for the bad debt score), your credit score could plummet down into the bad credit category sooner than you think.
What are Bad Credit Loans?
As the name suggests, bad credit loans are advances that are given to the borrowing party, even if they have a very low credit score. Short term, small loans such as payday loans are the most common types since they are considered low-risk credits.
In case of long-term loans though, if your credit score is really poor for whatever reasons, you will need to pay a higher rate of interest, as compared to what you would need to pay if you had a good credit score.
Who Provides Bad Credit Loans?
Virtually anyone can, but it’s usually not a first-rate bank or lending party that is likely to give you a loan, in spite of seeing a bad credit score. To avoid shady lenders, be careful and always do a bit of background research on a party willing to give you a bad credit loan, before taking their money.
They should show you exactly how much you will need to pay in interest + principle per instalment, depending on the loan amount and the selected tenure, before you apply for the loan.
If you are in a fix and you need to borrow a small but urgent amount of money, payday loans are the ideal bad credit loans for such situations. More importantly for a lot of people with poor credit scores, these help them to improve or even start their credit history. As long as they make the payments in time, it will be reported to the credit unions and they will increase the lender’s credit score accordingly.