If you have a less than perfect credit rating, you might be worried that this will have an impact on your ability to take out a loan, and, as you embark on your search, you are probably finding out that to some extent you are right. But don’t panic, you are not alone. Latest research suggests that one in three people in the UK will have credit issues at some point, and there are ways to get a loan if you find yourself in this predicament.
When you have a bad credit score
Before we offer some practical advice and tips, it is important to realise that if you do have a poor credit score, you are likely to face a few more obstacles than if otherwise. If you have had any form of credit in the past, your history will be out there, showing any potential lenders your borrowing and payment activity. If your record shows periods of paying back debts late, or not at all, you have become a riskier prospect, and should expect any potential lenders to compensate themselves for that risk; usually by charging a bit more for their products.
Our first piece of advice as you start shopping around for a suitable loan, is to avoid the temptation of payday loans. These have a reputation of trapping people with huge interest rates and can become a vicious cycle of increased debt, rather than a sensible payment plan that could work to improve your credit score.
Our advice is to take on a safe approach to borrowing if you have bad credit. When we help our customers in their search, here are a few things that we would look for in a lender:
- Reviews your current financial position:
Rather than the trappings of a short term, high interest payday loan, a reputable lender would spend more time analysing your current financial situation to build up a picture of your ability to pay back a sensible loan figure.
- Comes up with a sensible payment plan:
There are lenders out there who offer loans that can be paid over longer periods with higher, but sensible interest rates. Importantly, these loans would be offered with a clear, repayment plan in place, set up in a way for you to achieve the full repayment.
- Performs a credit check:
A lender who doesn’t look at your credit, is one to be very wary of. You want a lender to take a sensible look through your credit history, and paint a picture and asses the risk for themselves. It can be daunting for you, but it means that together you and a lender will agree the correct loan amount and payment plan.
Regardless of the amount of money you want to borrow, it is vital to remember that you never want to set yourself up with an unrealistic payment burden. Meeting the monthly repayments will help improve your future credit rating and take you one step closer to enjoying the benefits that come with having a better credit score.
Let us know if you want to know a bit more about applying for a loan when you have some adverse credit.
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