Having a poor credit score doesn’t mean you can’t get a loan or improve your chances of getting the loan you need. There are some simple tips and strategies you can do to help get the loan you need without having to resort to loan sharks or lenders who charge very high-interest rates.
Here are 6 ideas you should consider:
- Rather than go out and get a loan design for those with poor credit, why not invest some time in proving your credit rating. For a small monthly subscription you can register with one of the credit monitoring agencies. These services allow you to check up on your credit profile and offer advice and help on how you can improve your credit score. Having a better credit score will not only improve your chances of being accepted for a loan, but will also reduce the amount of interest you will have to pay on that loan later on. Doing this now will improve your financial health, and save you lots of money in the future when you wish to take out further credit and loans.
- Consider taking out a loan with the help of a guarantor. Guarantor loans are designed for poor credit borrowers and those who have an adverse credit history. You’ll massively increase your chances of being accepted for loan and you’ll pay rates that are far lower than other “bad credit” loan providers. Guarantor loans have become very popular in recent years with the introduction of the “old style” credit checking, and relying less on what the computer says.
Loan comparison websites like Lending Expert allow you to compare guarantor lenders and offer a free comparison service. You can expect to pay around 45% APR for a guarantor loan, which is much cheaper when you compare it against other forms of bad credit lending options.
Guarantor loan amounts are generally from £1000 – £8000 and loans can be repaid over 1 – 5 years depending on your requirements.
- Consider borrowing from friends and family. It is often difficult to ask for help from friends or family, but often these types of loans are the cheapest and avoid you having to deal with expensive lenders. These types of loans are ideal if you need a small amount and you are confident you can pay the loan off quickly. It would be wise to draw up a simple agreement or contract so that the loan terms are clear and set from the start. It is important to stress however that borrowing from friends and family can be dangerous and may damage your relationship if you failed to meet the repayments or pay back what you owed. Therefore these types of loans should be carefully considered.
- Speak to a local credit union to see if they can help with a loan. These types of loans are also considered to be a more cheaper and affordable loan option. There are no penalties for early repayment and provide a viable option if you are looking for a small loan amount.
Some credit unions loans will cost you no more than 1% a month on the reducing balance of the loan (an APR of 12.7%). For example, if you borrowed £1,000 over 1 year, you would repay no more than £1,067 in total. If you can read more about credit unions at abcul.org
Credit unions also offer free money advice and help on issues such as debt problems and advice on managing your finances.
- The best strategy and the preferred option for many is not to have to get a loan in the first instance. Are you able to sell off or pawn some items or jewellery you no longer require or need? Can you clear out some of your old junk to sell at the local car boot sale to raise the money you need. Selling off unwanted items may be a good strategy if you can looking for a small loan or up to a few hundred pounds.
- Consider saving up for what you need. If you can have the time and you don’t require a loan in the event of an emergency, can you save up the money you need? This won’t be possible for those who need a larger amount of money, but if you can wait and put some money away each payday then saving up for what you need will mean you won’t have to get in debt.