Whether you like it or not, lenders will look deeper into your credit report to determine your creditworthiness. You can get a loan at lower interest rates if your credit score is stellar, but you may be shown the door if your credit score is below average.
Lenders hesitate to lend money to borrowers with no credit history as well. Yet, there is a difference between both the terms.
A no credit history means you have never taken out a loan leaving no history behind you, hence inability to show how long you have been responsible with your borrowings.
A bad credit history means your credit report consists of several defaults that show your reckless attitude toward financial obligations.
Less-than-perfect credit scores do not mean you cannot get a loan
Just because you have a bad credit report, does not mean that lenders will not let you take out any loan. Less-than-perfect credit scores indicate the high default risk and therefore, lenders charge relatively higher interest rates.
A poor credit score precludes you from applying for loans with attractive interest rates. You need to have a good credit score if you want to take out these loans.
Have a look at the table below:
| 961-999 | Excellent |
| 881 – 960 | Very good |
| 721 – 880 | Fair |
| 561 – 720 | Poor |
| 0 – 560 | Very poor |
Even though you have a bad credit history, you can apply for any type of loan like guaranteed loans from British-lenders.uk. You will end up with paying high interest rates. The higher the default risk, the higher the interest you will pay.
However, creditworthiness is not the foremost ground that serves as a basis for decision-making. The lender will also look over your salary, financial stability to decide on the disbursal limit.
Advantages
- You can get the loan despite your bad credit scores
Banks may turn down your application if your score is low. If you come up with an emergency, you will face difficulty in borrowing money because the grounds on the basis of which you take out a loan are very weak. Since online lending follows lenient terms and conditions, you can get the loan despite the bad credit scores.
- Instant approval
Online lenders like British Lenders in the UK approve your loan applications within a couple of minutes. As you put in your loan application, they will take a few seconds to decide whether you should be given funds or not. If your application is approved, you will get the funds within the same day.
- You can build your credit
Bad credit loans can help you elevate your credit score. Make all repayments timely to avoid late payment fees and high interest.
Downsides
- You will pay high interest rates
Bad credit loans come with high interest rates because of high default risk. Lenders try to mitigate the risk of lending you money by charging high interest rates.
- You may be trapped by loan sharks
Not all lenders are reliable and generous. Some loan companies do not follow rules of financial lending rather they bait borrowers by offering very expensive no-credit check deals. Chances are you fall in a permanent debt circle. Make sure that you research extensively before taking out a loan. Contact multiple lenders and compare their deals to choose the best one.
How to Get A Bad Credit Loan At A Lower Interest Rate
Bad credit loans are notorious because borrowers find difficulty paying the loan on time due to high interest rates. Even though you try to get the loan at competitive interest rates, you will end up with paying much more than good credit borrowers. Despite the poor credit report, you can get these loans at lower interest rates by following ways:
- Arrange a guarantor
Generally, these loans do not ask you to bring a guarantor with a good credit history, but you can get the loan at lower interest rates by arranging a guarantor with a good credit history. Lenders feel secure that they will get their money and hence, they agree to lend you money at competitive interest rates. If you make any defaults, the guarantor will be called upon to settle the debt. Make sure that you do not fall behind payments. Otherwise, this will not only pull your credit score but the guarantor’s too.
- Put a security
If you cannot find a guarantor with a good credit history, you should put a security against the loan. Collateral makes the loan secured and hence, lenders approve your loan application at lower interest rates. Note that collateral must be worth more than the amount of the loan so that lender can release all funds if you make defaults. Secure your loan only if you are certain that you will be able to pay off all of your debt.
Description: You can take out loans despite your bad credit history but at high interest rates. To get these loans at lower interest rates, you can arrange a guarantor or collateral.
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