Tips on getting a loan for bad credit history

 

Having a poor credit history can make it harder to get a loan. That’s because you may be viewed by lenders as a high-risk borrower. Lenders always like to minimise the risk of not being paid back, so they carefully choose who they give loans and credit to. That means loans for people with a bad credit history are harder to secure and can come with stricter conditions and limitations. Even so, if your credit history isn’t as good as you’d like it to be, don’t despair - loans for people with bad credit are available. Let’s explore this in more detail.

 

 

Can you get a loan with a bad credit score?

First things first, it’s important to remember that your credit score can differ between the different Credit Reference Agencies (CRAs) and so there is no definite ‘bad’ credit score. However, if you do find your score isn’t what it should be, you can still obtain a loan. Just like loans for people with no credit score, loans for people with lower credit scores do exist. In fact, some companies actually specialise in them. Below, we’ve outlined the three main types of loans for people with bad credit. It’s worth noting that each of these loan types is likely to come with a lower borrowing limit and higher APR (interest) than standard loans.

 

Secured loans
This is the most common of loan for those with a bad credit score or history. With a secured loan, the borrower will offer something valuable - as a deposit against the loan. This is usually their home or a car and is known as collateral. If the borrower fails to repay their loan, the lender takes the deposit or collateral as payment instead.

 

Guarantor loans
If your credit history is particularly bad, you might be eligible for a guarantor loan. Here, a close friend or family member guarantees to repay your loan if you can’t. These loans are seen as high-risk by lenders, so they come with a high APR to compensate.

 

Personal loans
are for people with bad credit, but they typically come with a higher APR than other loans because the lender doesn’t have any security. These loans will have lower borrowing limits too, for the same reason. Over time, these loans tend to be more expensive than other types of loans for bad credit history.

 

Read more about Personal Loans

 

How to get a loan with a bad credit history

Hopefully we’ve answered the age-old question of can you get a loan with bad credit? Fortunately, it’s a yes. Now we’ll quickly explain a few of the easiest ways to do it.

 

Check your credit report
You can ask for one free credit report each year. You should check this carefully for errors or any out-of-date information, and get changes made if necessary. The report won’t include your credit score though, which you can get from some financial institutions or from a credit bureau.

 

Take an eligibility checker
Before you make a formal application for a loan, try the free online eligibility check most lenders offer for their products. You can look online for ‘soft search loans for bad credit’. These checks and searches aren’t recorded on your credit file, so they can’t damage your rating.

 

Make sure you can repay your loan
This one is really crucial. It sounds obvious, but do some honest household budgeting to work out how much you can afford to pay back each month.

 

Have your paperwork to hand
Spend a little time getting your documents together, like bank statements, pay slips and tax documents. Lenders might check these before they give you a loan.

 

Expect a hard credit check
Many lenders will need to run a ‘hard’ credit check on you at some point. This will show on your credit report and will lower your credit score in the short term. Try not to worry though; your score will bounce back, so long as you borrow responsibly.

 

Find out how to apply for a loan with Vanquis

How to repay your bad credit loan

Once you’ve got a loan, it’s very important that you manage it responsibly. That way, you’ll be improving your credit history and boosting your score, as well as making sure you don’t get into financial difficulty. Don’t forget that a better credit score will help you get access to better credit products in the future, saving you money in the long run. Just follow these simple tips for managing and repaying your loan.

Create a monthly budget and stick to it. You should be able to work out how much you’d be able to repay each month and then make sure you don’t ever miss a repayment.

Avoid adding to your debt while you’re paying it off, as this could damage your credit score as well as putting yourself under even more pressure.

Always talk to your lender if you’re worried about missing a payment. Your lender will listen sympathetically and help you work out a solution.

Why you should focus on improving your credit score

There are lots of decisions to make when it comes to getting a loan if you have a lower credit score, and it’s worth doing a bit of simple research online. Overall, though, whatever you decide to do, keep in mind that improving your credit score will always be a good thing.

 

A higher credit score won’t just help your application for loans or credit go smoothly; it will also give you access to better products. Once your credit score is good, you’ll be eligible to apply for products with higher spending limits, a lower APR, and probably some special perks and discounts too. Together, these factors will give you much more flexibility as well as save you money in the long term. That’s got to be a good thing.