“No credit, no problem!”
You may well have seen it on your TV, giant billboards or on your smartphone while browsing the web. The reality is that when you need to get a loan and you do not have a credit score or have a bad credit history, then there is a definite problem. It is not an insoluble one, but it is a problem which limits your options significantly.
This is because having a poor credit score makes you a high-risk customer in the eyes of the banks and other financial institutions. Those lenders have strict predefined standards and your credit score plays a pivotal role in their decision regarding the viability of your loan application. For instance, a solid credit score would benefit you with favourable credit terms and vice versa.
Remember, lenders need a loan repayment assurance without which your application would likely not even get considered. Strict regulations and stringent internal controls by lending institutions in the aftermath of the Great Recession makes lending a tough cookie to break for the borrowers.
However, there are always ways to get the economy going and for individuals with poor credit history, there are bad credit loans as well as unsecured loans.
BAD CREDIT LOANS
If your credit score is bad or beyond then getting a bad credit loan could be your only option, unless you won an encounter with loan sharks.
Although, it is much simpler for you to qualify for such loans it is also critical not to entangle yourself in a bottomless pit of debt. This is because the majority of bad credit loans are offered at an exorbitant rate of interest just because:
- Nobody else is entertaining your problem.
- A bad credit score often signifies financial habits that are in a freefall and therefore, the probability of default is high.
UNSECURED PERSONAL LOAN
An unsecured personal loan does not require a security assurance such as any tangible or intangible asset. Though, when you would apply for an unsecured loan on the back of a bad credit score the offered terms of interest would logically be borderline mind-boggling. Nonetheless, such loans are typically charged at a fixed rate enabling you to budget the amount you want to borrow against the sum you can afford to repay.
However, some lenders do offer variable rates as well, and if that is the case with your creditor, then this must be discussed before signing the agreement. In the UK, loans ranging from £1000 to £15,000 can be obtained under the ambit of unsecured personal loans and can be used for practically any purpose. These loan prices are available through everyday-loans.co.uk who specialise in loans for bad credit. They offer unsecured personal loans up to a maximum of £15,000 – other lenders may have a lower maximum price so choose your loan provider carefully based on your needs.
The following are the three most commonly availed unsecured personal loan types:
- Guarantor Loans
This type of loan comprises of a family member or friend guaranteeing to offset your liabilities in case you default on your guarantor loan. It is a feasible option to fulfil your financial needs and improve your credit score if you can manage a guarantor.
- Peer to Peer Lending
Such loans are normally fielded from peer-to-peer loaning sites such as Lending Club, Prosper, Peerform and others. These digital platforms enable potential borrowers to acquire loans from individual lenders rather than from the financial institutions.
- Payday Lenders
Under normal circumstances, a relatively small sum of money is borrowed at a premium rate of interest against a written agreement of repayment on borrower’s next salary. Payday lenders rely on debtor’s previous payroll and employment history to reach a deal. Like any other unsecured loan such offerings come at a substantial rate of interest.