People with a less than perfect credit score often turn to funding options that are far from ideal. These include loaning from a family member or friend, making unsafe deals with loan sharks, or selling personal possessions that are high in monetary and sentimental value. These measures tend not to bode well for the average person but, when in dire need of extra cash, sometimes it's just something that needs to done. If you're wondering whether there are any alternative options for someone with bad credit but a good attitude towards money, the good news is that there are!
Bad credit loan options – what to do when you need cash and have a poor credit score
Most people don’t think of loans for bad credit when the high street bank deems them unsuitable for a loan. Instead, they panic when they apply for a loan and it’s rejected, because they fear it is their only opportunity slipping between their fingers into oblivion. The reality is that times have changed and there are ways to get the cash you need, without putting your finances and future happiness at risk. Below are a few ways to get the cash you need when you have bad credit:
- Improve your credit score for better loan options
Many people feel most comfortable getting a loan from the High Street bank. However, the bank is often hard to impress, especially if you have a low credit score. You could start by looking into ways of improving on your credit score. A Telegraph article lists some of the following ways to do just that:
- Register to vote
- Limit credit applications
- Get credit building cards
- Cancel old cards
- Keep all accounts up to date (paid on time)
You can read the full article here.
Alternatively, you can look into loans for bad credit as they are specifically designed for people with a less than perfect credit score.
- Apply for loans for bad credit
It’s best not to get loans for bad credit confused with loan shark offers. Loan sharks offer illegal lending and this could get you into trouble. UK Citizen’s Advice provides some useful information on loan sharks and how to avoid them, which you can read here.
A loan for bad credit is a loan that is provided by a registered lender. Check to see that the lender offering a bad credit loan is legitimate before you get involved with them. If the company is legitimate, they will offer you a decent loan amount, but typically not more than £5,000. This amount is then repaid over 1 to 36 months, which is reasonable considering your credit status. A bad credit lender is focused on providing customers with financial relief without tying them into hefty loan amounts or lengthy loan periods.
You can use this type of small, unsecured loan to rebuild your credit score. How, you ask? Well, if you pay your loan back on time (or even earlier) and in full, this will reflect very well on your credit rating.
For many, loans for bad credit can sound too good to be true. Firstly, they can be applied for online. Secondly, they are paid out within 24 hours. And thirdly, there’s no guarantor signature required. These do sound like excellent reasons to apply for such a loan, don’t they? Moreover, if you're dealing with a reputable lender, these reasons aren’t too good to be true.
- Apply for guarantor loans
Guarantor loans are tricky because you have to find someone to co-sign your loan with you. Guarantor loans are taken out in your name, but if you default on the loan repayments, your guarantor (co-signatory) will accept responsibility for the loan and pay it back. As you can imagine, your co-signatory would have to be a close friend or a family member and it’s best to be aware that this could cause problems in the relationship or friendship.
There are, of course, benefits to applying for and getting a guarantor loan. These include:
- Easier loan approval.
- Lower interest rate than other bad credit loan options.
- Higher loan amounts than most non-guarantor bad credit loans.
When it comes to sussing out your loan options with bad credit, it's best to do thorough research. Don’t loan more than you absolutely need to and ensure that you are able to pay back the loan by the agreed date (or can afford the monthly instalments). Having bad credit doesn’t mean it’s the end of the financial road for you. There’s every opportunity to rebuild your credit score and get the money you need right now – you just need to be smart about it.