Types of Loans You Can Apply for Even with Bad Credit

Having bad credit can ruin your chances of being approved for credit. Generally, lenders find it difficult advancing credit to people with a poor credit rating. People with a poor credit rating are deemed as financially irresponsible and therefore face problems whenever they are in need of credit. To this end, they have been forced to seek credit from lenders that don’t attach a lot of importance on their credit score. If you have bad credit, you will agree with me that securing credit or a loan from high street banks in the UK is an exercise in futility. It’s almost impossible unless you have a guarantor with a healthy history or an asset you can pledge as security.

However, you need not fret as there are a number of options you can go for and get the much needed credit at short notice even if you have bad credit. What are some of these options?

Logbook loans

Going by the name, logbook loans are the kind that requires you to pledge your car logbook as collateral. You basically approach a lender, express your interest in getting a loan and receive the much needed cash after providing your logbook as security. Generally, in order for your car to qualify as collateral, it needs to be in good condition, it needs to be free of any financing and to have been on the road for less than 10 years. This is something that logbook lenders take very seriously and therefore if you need credit on short notice even if you have bad credit, then you need to take the aforementioned very seriously.

The moment you express your interest for a logbook loan, your lender will evaluate the value of your car for the purposes of determining its exact value or the amount of money you qualify to be advanced by using your car as collateral. Using your car as collateral, you can apply for a loan of up to 75% of your cars value. You will sign a bill of sale agreement with your lender that temporarily makes him the owner of your car for the term of the loan. However, you will continue using your car as you make repayments. The good thing about logbook loans is that your credit score doesn’t play a role in determining whether you get approved or not. The bad thing is that the interest rates are very high and you can end up repaying twice the amount you borrowed. Also, if you fail to make repayments, your lender can repossess your car.

Payday loans

As the name implies, payday loans are advanced and repaid on your next pay day. They are unsecured loans that ordinarily last between 7 and 28 days. However, according to the arrangement you have with your lender, you can have the loan extended to cover even 3 months. Like logbook loans, you need not have a perfect credit score to be approved for a payday loan. However, the biggest disadvantage is that the interest rates are very high and if you don’t take care you might find yourself deep in debt. Payday loans are good especially when you want emergency cash as they are always approved within hours and your credit score doesn’t come into play.

How to Improve Your Chances of Being Approved for a Loan

Applying for a loan can be a nerve wracking experience especially when you have a less than average credit score. Financial institutions as well as lenders take the issue of credit score very seriously. It’s what tells them whether you are financially responsible or not. Your credit report provides a history of your financial habit in the past. It gives your lender a glimpse of how you have managed your finances in the past and help them make a decision as to whether you are able to make repayments when advanced for a loan. With that said, before applying for a loan, there are a number of things you need to do to improve your chances of being approved.

Find out whether you qualify for a loan or not

For every loan product on offer, there are basic requirements that applicants must meet. You must be a UK resident, be over 18 years of age and above, have a steady income and meet all other requirements of a loan. On top of that, there are other requirements such as some form of collateral and many more. Applying for a loan blindly without understanding all the requirements or what it takes to be approved is the reason some loan applications are rejected.

You need to check out the maximum amount of money you can borrow

Improving your chances of being approved for a loan means that you need to borrow what you can afford to repay. This is the very reason why there are caps and why your income comes into play when applying for a loan. Find out how much money you can borrow and if your current income is able to support repayments on top of your monthly expenses. You should always go for a loan amount that your income can support in terms of repayments. If not, you will simply be setting yourself up for rejection. No sane lender will approve a loan request if your income cannot support monthly repayments.

Put your credit report in order

Your credit score plays a very important role in determining whether you will get approved for a loan or not. Whether you are applying for a short term loan or a long term loan, your credit rating will always play a major role. Considering the fact that you might be having a low credit score because of a number of errors in the report, the logical thing to do is to check out the report if there are any errors and rectify before making an application for a loan. It greatly improves your chances of being approved for a loan where your credit score is in perfect order.

Seek for proper financial advice

If you have never applied for a loan, it’s essential that you get every lit bit of information before you take the plunge. A financial expert will play a great role in enlightening you on the delicate nature of applying for a loan, what you need to do before and after applying and every little thing concerning loan applications.

Can a Poor Credit Rating Hinder Your Loan Application Efforts?

If you’ve never applied for a loan or a mobile phone contract, you might not be able to fully understand the role that a good credit score plays in approval of your loan. A credit score is a two edged sword. On one side, if you have bad credit, you won’t be approved for any kind of loan. On the other hand, if you don’t have any credit score, your chances of being approved for credit are nil. What does this mean? It means that you not only need to improve your credit score but also find ways to build it from scratch if you don’t have any score. However, we are not going to focus on that today.

We are going to answer the question whether a poor credit rating can hinder your loan approval and whether there is a way around it. To hit the nail straight on the head, a poor credit rating can limit you from getting approved for a mobile phone contract or a loan. Lenders deem people with a poor credit rating to be high risk borrowers and therefore never accept their loan applications. To this end, a poor credit rating can hinder your loan application efforts.

However, you need not despair as there are different types of loans and mobile phone contracts that accept people with bad credit. These kinds of loans do not take into consideration the credit status of a person. Perhaps you’ve heard about logbook loans. These are secured kinds of loans that do not take the credit status of a person into consideration. All you need to have is a car logbook and you will get access to a loan. You do not lose possession to your car but rather continue to drive it for the duration of the loan. However, your lender will hold your car logbook in lieu until you repay the total loan amount in full.

With a logbook loan, you are assured of loan approval provided that your car is in good condition, free from financing and has been on the road for less than 10 years. The second type of loan you can be approved for even with bad credit are payday loans. These are unsecured loan instruments repaid when you receive your next paycheck. It is a short term loan and usually lasts between 7 and 28 days. Payday loans do not take into account a very high credit score before you can be approved. You can be approved with a less than perfect credit score provided you have proof of income, you are a resident of UK and are 18 years and above.

The third type of loan you can be approved for even with bad credit is guarantor loans. Basically, your guarantor is held liable for your loan in the event that you cannot be able to meet your monthly payments. The guarantor however needs to have a healthy history before your lender can approve you for a loan.

If you have bad credit and looking for better options in the market, the above mentioned loans can come handy. The only downside is that they attract very high interest rates and a person may end up repaying more than twice the principal amount.

Logbook Loans – What Are the Risks?

If you live in UK and you are familiar with the subprime finance practices currently trending here, you might have heard of ‘logbook loans’. Logbook loans are a handy option for people to borrow money who are unable to avail the conventional means of borrowing money due to bad credit record. These loans are becoming more popular means of borrowing money day by day as the financial needs of an individual increases.

How do logbook loans work?

Logbook loans are secured loans, where the value of the loan is secured against the value of your vehicle. The logbook of the vehicle is transferred to the possession of the borrower and it remains there throughout the duration of the loan until all the repayments are made. Thus, your vehicle is used as collateral. Also, the car remains in your possession and you get to drive it wherever you want. The loans typically offered are within the range of £500-£50,000 and the cash is delivered quickly, making it even more attractive and appealing for people who have a bad credit record. However, the amount of money lent varies directly to the worth of your car.

Now the process may not be as convenient as it looks on the surface. There are definitely some risks involved.

Interest charged is very high

If you are signing for a logbook loan, you have to brace yourself for a very high interest rate. At least 400 percent APR is charged on a logbook loan if not higher. Reasons for charging such a high interest rate is usually the fact highly emphasized by loan companies that logbook loans are short term secured loans and should only be used in case of emergency.

Lagging behind in payments may result in repossession

The greatest risk associated with a logbook loan is that your car maybe repossessed by the lending company and taken away if repayments are not made on time. When the lender signs a contract with you, they get a ‘bill of sale’ registered with the High Court that gives them the authority to repossess the vehicle if the loan repayments are not made on given time. Basically, the company uses the vehicle’s worth to recover the cost of the loan. Sometimes, additional money maybe demanded if the car alone is unable to cover the loan payments.

Also, the behavior of lending companies to the customers may become questionable and frowned upon when they are unable to make repayments on time. Some lending companies send series of harassing emails and calls, sometimes turning up at your residence to seize the vehicle. But that happens very rarely and companies who do that are not authenticated, thus you should not deal with them. Always do a thorough research, ask around for reviews, search the market for best prices and then sign a contract, getting knowledge of all the terms and conditions before signing.