Trying to take out a loan with bad credit? While getting small loans in the UK with bad credit can be challenging, it’s not impossible. Some lenders are focused on helping lousy credit borrowers get loans.
However, you’re more likely to get the best interest in small loans with good credit. This article reveals the best ways to borrow small loans in the UK even though you have bad credit.
Can You Borrow Loans With Bad Credit?
Generally, getting small loans is easier when you have stellar credit. A bad credit, indicated by a FICO score of between 300 and 579, shows you off as a risky borrower to lenders.
However, some lenders specialize in providing loans for people with patchy credit. But keep in mind that the interest rates for these loans are usually high, which makes up for the increased risk on the lender’s part.
What Do Lenders Consider to Approve Your Loan?
Lenders assess your creditworthiness based on several key metrics, which include:
- Credit score,
- Employment status, and
- Whether you have a security, be it a property or a guarantor.
Your credit score tells the lender how risky you are at a glance, and it summarises how well you’ve managed credits in the past and foretells how well you’ll handle credit in the future.
Typically, a bad credit score reduces your odds of getting a loan. In the same way, a good credit score gives you a better chance of getting loan approval. Getting a small business loan in the UK requires a good credit score.
Your income and employment status helps lenders assess your ability to repay the loan. Lenders are more likely to see you as less risky if you have a decent job and stable income sources.
How to Boost Your Credit Score
Having a stellar credit score is one of the best ways to borrow small loans in the UK. You’re halfway to getting a “yes” from your lender with good credit. But how do you boost your bad credit?
- Pay your bills on time – all the time. Late payments or no payments damage your credit.
- Take a credit builder loan. These loans aim to help people with poor credit build their credit. You take out a loan and repay it to boost your credit score.
- Avoid taking too many credits within a short timeframe.
- Ask a friend or family member with good credit to add you as an authorized user on their credit cards.
- Check your credit report regularly to know when there’s an error and fix it outrightly.
Best Small Loans For Bad Credit Borrowers
Here are some small loans for bad credit in the UK:
#1. Personal Instalment Loans
Personal instalment loans allow you to get a lump sum and pay back the loan with interest in instalments over a specific period. The biggest advantage of this type of loan is that it gives you ample time – typically, several months to a couple of years – to repay the loan and interest.
Payday loans are short-term loans with a high-interest rate and short repayment period. Borrowers usually repay the loan with their next paycheck. Payday loans are risky because of the short repayment period and high-interest rates. So, if you must take this loan, have a solid repayment plan.
#3. Car Title Loans
Car title loans are secured loans that allow you to get the money you need using your car as collateral. Remember that using your vehicle for collateral means the lender repossesses it if you fail to repay the loan by the due date. This makes car title loan another high-risk loan.
#4. Pawn Shop Loans
Pawn shop loans are secured loans. To get a pawnshop loan, you provide any valuable item you have – TV, jewellery, musical instruments, electronics, or any other entity, and the lender appraises it before giving the loan.
If you can repay the loan, the lender returns your item; if not, the lender sells the item to recoup their losses.
Where to Borrow Small Loans For Bad Credit
Many lenders in the UK are out to borrow small loans for bad credit borrowers. While this might sound soothing, it can get you trying to figure out who’s best.
Here’s a tip to help you choose a small loan provider in the UK: check for interest rates and repayment terms. Although small loans for bad credit often come with high interest, some lenders offer better deals than others.
Loan Princess is an FCA-authorized loan broker that helps bad credit borrowers to get the best-unsecured loans. This means you can get low-interest small loans in the UK with poor credit. These loans come from reliable loan providers and give long repayment periods, up to 12 months.
Beyond helping you get the best poor credit loans, loan princess is committed to helping you build your credit. This way, poor credit doesn’t stop you from getting loans with better terms or even your dream job.
You don’t need to spend your entire time figuring out the best lender for poor credit. Loan princess brokering service is willing to help by connecting you to reliable lenders. You can be sure of relatively low-interest rates and better repayment terms.