Bad Credit Loans FAQs
Just because you have a bad credit rating doesn't mean you'll never need to get a loan.
As the name may suggest, a bad credit loan is a loan designed specifically for those with a poor credit history. There are many reasons why a person might suffer from a poor credit rating - from an inability to manage repayments on credit cards or loan agreements, to having County Court Judgements (CCJs) held against them.
Even if you've never had a credit card or loan in your name before, you could have poor credit simply because lenders are unable to access evidence that suggests you're able to manage your borrowing habits successfully.
Below are some of the most frequently asked basic questions about bad credit loans. Just click on the question headings to see the answer.
What kinds of bad credit loans are available?
The term "bad credit loan" is often used to refer to various loan products specifically available to borrowers with poor credit ratings, who may struggle to access other forms of credit.
These products may include secured loans, short-term loans, guarantor loans, and various other options designed to give lenders more security when offering money to borrowers.
Where can I get a bad credit loan?
Although bad credit loans are sometimes available from mainstream lenders, they are more commonly provided by specialists. You may need to look specifically for lenders who advertise their ability to work with borrowers with poor credit.
What are the pros and cons of bad credit loans?
All loans come with certain pros and cons. In the case of bad credit loans, the biggest advantage is that you have an opportunity to borrow money that you might not be able to access elsewhere because of a poor credit history.
This can offer a real financial lifeline to those who need to get capital quickly. What's more, having a loan can sometimes help people who have poor credit ratings to repair their credit status, as long as they make repayments on time.
The largest drawback of bad credit loans is that they usually have very high interest rates in comparison with standard loans. This is because applicants with poor credit represent a higher risk to lenders.
Are there risks in getting a bad credit loan?
All loans come with certain risks, which is why you should always make sure that you can afford repayments before you agree to any loan terms. If you don't make repayments as agreed, you could end up heavily in debt.
If I don't get accepted for a bad credit loan, should I just keep trying?
No, if you don't get accepted for a loan, don't simply keep applying in the hope that the lender will change their mind. Applications for credit - regardless of whether they are successful or not - will show up on your credit file, and could make lenders think you're desperate for cash - something that might damage your credit rating even further.
Are there any ways I can improve my credit rating?
When it comes to getting a good deal on a loan - regardless of what you might need the money for - you'll always be able to access better deals when you have a good credit rating. In some cases, this may mean that it's better to build up your credit score, before you apply for a big loan. You can do this by:
- Paying off credit card and loan repayments on time - accruing no further debt or interest.
- Consolidating your debts into a more manageable monthly repayment.
- Speaking to a debt or credit advisor.
If you've never taken out a credit card or loan before, and that's the reason for your bad credit, the easiest way to improve your score is to use a credit card regularly, and pay off each purchase on time.