Applying for a loan is easy for those with good credit standing. In the UK, lenders can check a loan applicant’s credit score through some of the agencies that rate the credit-worthiness of people applying for credit. People that get a good rating have higher chances of getting a loan compare to those with low scores. Lenders consider it risky to invest on borrowers that might default on their payments. However, there are lenders that offer bad credit loan or a loan for borrowers that cannot pass the credit score requirement of traditional financing companies and banks.
When you are in dire financial need, here are some guidelines in successfully applying for a bad credit loan.
Know the Basic Requirements
Before applying for a loan, make sure that you meet all the requirements. In the UK, applicants for bad credit loan must be at least 18 years old and a legitimate resident of the United Kingdom. An existing bank account is necessary because the lending company deposits the funds to your account. You can make payments through automatic transfer from your account to that of the lending company. The last requirement is proof that you are capable of paying back what you borrowed. The lender would ask you for a copy of your pay slip or of your bank statement. Submitting all these documents can help speed-up the application process, which could only take a few minutes to an hour.
Be Aware of Your Credit Score
Bad credit lending companies are not strict when it comes to a borrower’s credit rating. Nevertheless, having a good credit standing can assure you of loan approval. If your credit history does not look good, do something to improve it, such as making prompt payments once you got your bad credit loan. A good credit standing would allow you to take bigger loan amounts.
Shop for the Best Loans for Bad Credit
Find the best bad credit loan offer by comparing different lenders. One important thing to consider is the loan amount, which may vary from lender to lender. Decide how much money could resolve your problem and apply for that amount. Asking to borrow beyond what the lender specifies can lead to the rejection of your request to borrow money.
Knowing how much annual percentage rate the lender charges could help you get a loan that you can easily pay. Bad credit loan companies do not have the same interest rate and going for one with the lowest would be to your benefit.
Check the repayment terms. Most bad credit loans are payable within 3 months to 36 months. When deciding on the repayment term, always consider your financial circumstances. If you have a good salary, you can opt for a 3-month repayment plan and longer if you have a low net income.
When applying for a bad credit loan, you can choose between a personal loan and a secured loan. A personal loan would not require you to secure the loan with your valuable property such as your house or your car. Because it is not secured, you can only qualify for small loan amounts. If you need more money, you can mortgage your house or your car. However, you would face the risk of losing the house or the car that you used as security because the lending company can seize these properties if you cannot pay your loan.
Another way of getting a bad credit loan easily is by having a guarantor or someone to cover the loan if ever you cannot complete the payments. You can ask a relative or friend to be your guarantor.