A credit score represents your reputation as a borrower. In the UK, each credit reference agency uses many different sources and measures to establish yours. Therefore, various agencies would determine your credit score differently and that is also the reasons why one credit provider could refuse you and another can accept you.
For instance, if your credit score currently loiters below 500 due to a plethora of reasons and you need funds desperately, and are also worried about it sliding further down then stop worrying – start scanning bad credit loans.
A bad credit loan is in fact a personal loan for individuals with feeble, poor or no credit history. There are many types and several financial institutions such as banks, online lenders and credit unions that offer them.
Your desperation for money in the wake of a bad credit history makes you a prime suspect for bad credit loan scams. Therefore, anytime a moneylender rushes through the loan details and the documents, it is a cue to move on to another provider. A reputable and trustworthy lender will always have an extensive conversation detailing all the pros and cons of the offer made to you. Such transparency will also enable you to determine the possible financial adjustments necessary for future repayments.
When searching for bad credit loans online, check that the lenders website is legitimate and that they are regulated by the relevant institutions. An example can be seen at https://www.everyday-loans.co.uk/ who state at the bottom of their website that they are authorised and regulated by the FCA, they also have an SSL certificate which is one of the primary signs of a secure website. Stick with reputable and cooperative loan providers and you shouldn’t run into any issues.
Here are three most prevalent bad credit loans:
1. Guarantor Loans
The most convenient way to stop your credit score from getting any worse is by opting for a guarantor loan. In simple terms, a trusted friend or a family member co-signs the loan agreement to assure repayment if you default on your loan. Admittedly, it is easier said than done. Also, the interest rates would be on the higher side as a bad credit score also signifies bad financial habits.
Always ensure you don’t borrow more than you can pay in the next two years as that is the amount of time required to get your credit score in order – provided you make regular loan repayments during this period.
2. Homeowner Loans
If you own a home and do not have a pressing need for a new liability, you can always leverage your home equity as security for a loan. Alternatively, you would be risking your home in the event of a default. This type of loan can take your credit score from bad to worse, therefore, exercise caution when deciding upon one.
For example, there are homeowner loans that are repayable over 25 years which means you can borrow a sufficient amount of money at a comparatively low monthly instalment. For instance, you can borrow £25k repayable over 25 years, at a 7% interest rate. In this scenario, your monthly loan payment would be about £180. However, you would still be paying more markup over the life of the loan than the funds you borrowed.
3. Logbook Loans
A logbook loan is a conventional loan that is attached to your automobile. The interest rate is tremendously high, running at an average APY (annual percentage yield) of nearly 400%. Nonetheless, if you are in a rut and money is the only solution then a logbook loan could be your only option.
However, as widely reported the majority of logbook borrowers are unable to manage their finances properly and are just trading one bad financing form for another.