How to Secure Loans with Bad Credit
It's never fun having to deal with bad credit when you are trying to borrow. Bad credit generally results in higher interest rates, less favourable repayment terms, and extra fees and charges assessed to minimise the risk for lenders. But having bad credit doesn't make it impossible to secure loans. You just have to know how to go about doing it in a way that maximises your opportunities.
Getting a loan with bad credit is essentially a three-step process. We have outlined the steps below to help get you started. Note that the first two steps have everything to do with educating yourself. The more you know about the process, the better position you will be in to get that loan you need.
Step #1: Learn What Constitutes Bad Credit
The first step is to learn what actually constitutes bad credit. Educating yourself in this area is important because it helps you better understand how to apply and who to apply with.
There are various forms of bad credit that may show up on your credit report. Some are more serious than others. For example, missing a few payments here and there is minor compared to a credit report showing a bankruptcy or a county court judgement. Even if you've missed a few payments, you can probably still get a half-decent loan deal -- especially if those missed payments are a year or more in the past.
If you are dealing with a more serious credit issue, then you are likely going to have to work harder to secure a loan. You will also have to be willing to accept higher interest rates. Getting a loan and making good on repayment goes a long way toward restoring your credit.
Step #2: Learn about the Different Loan Options
There are three basic loan options for people who need to borrow despite having bad credit. The first two are loans you don't want; the third type of loan can be very beneficial in helping you raise the cash you need and repairing your credit at the same time. The three options are:
- Bad Credit Personal Loan â?? A bad credit personal loan is an unsecured loan with an average limit of Â£5,000 or less. Interest rates are typically high, and repayment terms are not the most favourable.
- Payday Loan â?? A payday loan is definitely something you do not want if you are trying to fix your credit. Payday loans are structured in a way that makes it too easy to get into an unbreakable cycle of debt.
- Secured Loan â?? The borrower guarantees a secured loan through the equity in his or her home. This kind of loan is the easiest for people with bad credit to get. In addition, borrowers can usually get tens of thousands of pounds even with bad credit. It is all about equity.
Step #3: Compare Multiple Loan Deals
The last step to securing a loan with bad credit is to compare multiple loan deals. There are lots of lenders offering secured loans to borrowers with adequate credit, but some lenders are more competitive than others. There is no way for you to know who is offering the best deal unless you are willing to compare them.
You can secure loans for yourself even if your credit is less than stellar. Remember that bad credit is not the end of your financial life. Instead, it represents a challenge to take the necessary steps to put things back in order. Getting a secured loan and paying it off might be part of your process.
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