Need a loan but have a bad credit rating?
It doesn’t feel great, does it – to be judged by someone you’ve not even met. Yet lenders have to have some way of deciding whether the person in front of them will repay the credit being extended to them, and that way is to review your credit history. But you may be relieved to hear that it’s entirely possible to secure a loan, even with a less than perfect credit history.
Here are five ways to secure a loan, even with bad credit.
Bad credit loan method one – Apply for a secured loan
Secured loans offer some certainty to a lender, as they reduce the risk that the person they lend to will leave them servicing a bad debt. The most common form of secured loans is an equity release loan, however this form of credit is not to be used without serious consideration. Should you be unable to keep up with your repayments you’ll be at risk of losing your home, so it’s worthwhile researching other forms of lending before moving ahead with a secured loan.
Bad credit loan method two – Rebuild your credit before applying for a bad credit loan
In some instances, you may be able to take some simple steps to improve your credit score, such as:
- Ensuring that you’re registered on the electoral roll
- Checking all your information is correct, and that any defaults or poorly run accounts have the correct information
- Strive to keep up with your bills for a minimum of three months
- Close any unused credit accounts
- Reduce the amount of debt you have
For a more detailed walkthrough for improving your bad credit score, read our guide: 20 Effective Tips Debt Consolidation Loans for Bad Credit Poor Credit UK.
Bad credit loan method three – Think about using a guarantor loan
Another option that may be suitable for your circumstances is a bad credit loan that is backed by a guarantor. With this type of credit solution, the interest rate that applies is based on the guarantor, rather the person who is actually borrowing the money.
Should you choose to consider this solution you should think carefully about how your relationship with your guarantor could be impacted if you were to fall behind on your repayments. If this were to happen both you and your guarantor will remain responsible for repaying the loan, and any missed repayments will damage the credit score of both you and your guarantor.
Bad credit loan method four – Use a financial product marketplace
Online comparison marketplaces can help you uncover lenders that are willing to provide credit to those with a poor financial track record. Examples include: Know Your Money, Money Supermarket, Go Compare, Totally Money and Compare the Market.
Using websites such as this will also help you secure the lowest interest rate.
Bad credit loan method five – Consider alternative debt solutions
While it’s possible that you may be approved for a bad credit loan, it may not be the most suitable solution for your financial circumstances. If you’re struggling with debt, take the time to research the available debt solutions here.
An Individual Voluntary Arrangement is one such solution which could wrap all of your debts into a single repayment. IVAs last for between five and six years, after which time the remaining debt could be written off.