When you have a less than perfect credit rating, personal loans are especially hard to come by. Major lenders in the UK will likely reject your personal loan application because of the high risks you pose on their profits. Some banks may offer loan deals but for a steep price. Not only is the rep APR very high for bad credit loans but there are also hidden fees and other tricks that can increase your loan’s cost some more.
To avoid getting the bad end of the deal, it pays to know what types of loans are available for you if have bad credit. Whether you’re borrowing just the minimum loan amount or you’re looking to borrow a larger amount, here are some of the loan options you can check out:
One of the most controversial loans available for people with bad credit is a payday loan. As the name suggests, these are personal loans that are tied up to your paycheck. Lenders usually require that you provide proof of steady income, that means providing your most recent pay slips. You can then borrow anywhere from £100 to £1,000 to cover for a wide variety of personal needs. The loan needs to be repaid on your next paycheck, usually within 28 days from the date you borrowed the money.
Though widely accessible, there’s one major downside with payday loans. Because there are no credit checks ran on borrowers, the interest rate is pretty steep. The average rep APR for payday loans is 1,000% or more.
If you need a larger loan amount and you have bad credit, one option worth checking out is a guarantor loan. Unlike payday loans, guarantor loans are much cheaper in terms of interest rates. In fact, the rep APR is typically below 100%. If you know where to look, you may find a guarantor loan deal at 50% rep APR or below. With guarantor loans, you can borrow larger loan amounts from £1000 to £7,500.
Guarantor loans, however, are not as easy to avail. To be eligible for the loan, you’ll need a guarantor. Unfortunately, it’s not always that easy to find an eligible guarantor. Your guarantor needs to be of legal age, a UK resident and must have good credit. Naturally, the guarantor must agree to co-sign the debt agreement with you. In the event that you are unable to repay the loan, the guarantor basically shoulders the repayments on your behalf.
Finally, we have here logbook loans uk. These are secured personal loans that require a vehicle for security. If you’re of legal age, a UK resident and a vehicle owner, you are eligible to take out a logbook loan. Since there’s collateral involved, you can borrow even larger amounts than what guarantor loans offer.
In general, loan amounts offer start from £1,000 up to £50,000. The maximum amount you can borrow will depend on your income and car’s official trade value. Repayment terms start from 12 months to 36 months. You can pay your loan weekly or monthly depending on your arrangement with your lender.
Like the other two types of personal loans, there is no credit check involved when assessing your loan application. No matter your credit score, approval is more than likely. Just remember that the biggest risk with logbook loans is the risk of repossession. Since the loan is tied to your vehicle, you may lose your car in the event that you delay or miss payments.