Getting a loan in the UK can be an easy process if your credit score is of stellar quality, but if you have a really bad credit history, things can get quite tough if you are applying for a personal loan or an unsecured loan. A lot of people going through hard times in the UK need loans to be able to find their feet. It is quite unfortunate that most of these people are the same with the worst financial histories. For this reason, there are poor credit loan options available in the UK. This post is about those options and how to access them.
Getting a loan with poor credit
You might be wondering why it is difficult to get a loan if you have bad/poor credit. The reason is because, before banks and most credit facilities hand out loans, they research the credit history of the loan applicant to determine how diligent they are with repayments. If you have been missing repayments on a credit card or a personal loan, or you do not even have a credit rating at all, a lot of lenders will be apprehensive giving you a new loan. The credit score is an important determinant for lenders in the UK. However, there are other options available for people who have bad credit histories and are willing to improve them. These are called bad/poor credit loan options.
Secured loans – Logbook loans
Secured loans are the most common types of loans borrowers can obtain when they have bad credit scores. Secured loans are loans that are taken with the use of collateral, which could be a piece of property or some other valuable asset like a vehicle. A very good example of a secured loan is the log book loan, where borrowers can borrow almost any amount of money from a logbook lender, with the only consideration being the value of the vehicle they are placing in lieu of the loan. The logbook loan is quickly becoming one of the most popular of the secured loans because borrowers with poor credit can always be sure of access to cash, if they have a vehicle they are willing to use as collateral. Other examples of secured loans include mortgages.
If you have a really poor credit rating and you have the good luck to have a friend or otherwise benefactor who has a good credit rating and is willing is stand as your guarantor, then you may be eligible for a guarantor’s loan. This is one of the few unsecured loan options that individuals with bad credit can subscribe to, as only their guarantor’s credit history is considered by the lending facility. However, note that failure to repay your loan will require your guarantor to fulfill the obligations.
By using a peer-to-peer lending platform, such as Prosper, Lending club or Peerform, you could access peer loans from other individuals that can get you out of a tight spot. These loans are unsecured and not wholly based on your credit history, so you still have a shot if your credit is bad.
It is wise to note that, while your credit history may not be the most important consideration for bad credit lenders, there are still some factors they consider before they lend money to people with bad credit. Factors such as the borrower’s job or emotional stability, salary and assets are still considered. If you still get rejected when applying for a bad credit loan, don’t be deterred, you can always apply again.