Having bad credit means that your credit file contains evidence of missed loan payments, bankruptcy or judgements against you. If you are looking to obtain a loan, the providers will access your file and would consider that you may not be reliable enough for them to offer credit. A credit score can repair and by taking further loans and paying them off and by using a credit card sensibly along with the passage of time, you can repair your credit. You may need to look for a bad credit loan lender.
So how do you go about finding a reliable lender if you have bad credit?
The first question you must ask yourself is ‘How much can I afford to pay for the duration of the loan’. Take into account any change of circumstances that may be likely to arise during the period of the loan. Then decide on how much money you need to borrow and over what period of time could you pay that back. Is the loan really necessary or could I wait?
There are a number of options open to you depending on the amount of borrowing and the duration of the loan.
Secured or Unsecured Loans.
A secured loan is a loan which is taken out and secured against the value of an asset, usually a property so if you are a homeowner, this could be an option. This means however that if you default on payments, your house would be at risk. With an unsecured loan you are not taking that risk. Shop around. There are many loan lenders out there who will lend to you but many of them will lend to you at a very high rate of interest. Each lender has their own criteria and you may find that some are a bit more flexible than others. You will see an APR quoted on each loan, the figure quoted is a representative figure and it may not necessarily be offered to you so ask for the APR. Do not apply to too many lenders at the one time as too many credit searches on your file can add to the negative impact that you already have. Look for reviews online to find out what other people are saying about the lender.
Talk to Your Bank.
Would an overdraft facility be an answer for you? If you need a small amount of money over a short period of time, this could be a possible option.
You would have to be a member before they would lend to you but Credit Unions tend to have more favourable interest rates compared to the banks and other lending institutions. They do however ask that you have a savings plan with them.
This is becoming an increasingly popular way to borrow money. Peer-to Peer lending companies operate online. The borrower is matched with a member of the public who has money to lend and an agreement is reached.
Use a Broker.
Having bad credit does not mean that you will not get a loan, it just means that your search will be more difficult. It may be worth talking to a broker who has access to multiple companies and may be able to save you time and money with your search. He / she will also be able to guide you through the application process.