If you have a poor credit score, you may be worried about your chances of securing a loan or other types of credit.
Luckily, many lenders offer bad credit loans, which have been designed to help those in difficult financial situations to receive credit, no matter their credit history.
We have put together this post to tell you everything you need to know about bad credit finance and loans so you can decide if it is the right option for you.
What Is A Bad Credit Loan?
Bad credit refers to a history of financial issues that could stem from keeping up with payments on credit agreements or missing bill payments, amongst other things.
When applying for finance, companies will look at your credit history to determine whether you will be able to make repayments on time in the future.
With bad credit loans, companies usually base their lending decisions on affordability, rather than on your full credit history, making finance accessible for almost everyone.
What Are The Benefits Of Bad Credit Loans?
There are a few advantages to securing a bad credit loan, including:
- It may improve your credit score – by keeping up to date with your repayments, you will see a positive effect on your credit score. When the full amount is repaid, you will have a closed case with full repayment on your history, which is very attractive for future credit applications and you should be offered better rates as a result.
- Quick access to money – many lenders may be able to transfer the funds requested to your account very quickly, with some even offering same-day transfers. This makes bad credit loans ideal if you need quick access to cash.
What Are The Disadvantages Of Bad Credit Loans?
While there are some benefits to this type of loan, there are also a few disadvantages, which means that this type of loan isn’t for everyone. These include:
- High-interest rates – if you have bad credit, you can expect lenders to charge you a higher interest rate than other people. This could mean that the overall amount you pay back on a loan may be more than you first expected.
- Extra fees – this does not apply to every lender, but it is worth checking the terms and conditions for any penalties, such as late repayment or returned payment fees.
- Commitment to monthly repayments – if you have had trouble with meeting monthly repayments in the past, you may find it hard to commit to monthly repayments again. If you miss these payments, you could risk damage to your credit score and incur extra costs.
How Do I Get A Bad Credit Loan?
If you have a poor credit rating or no credit score at all, you may find it difficult to get approval on your loan applications.
However, there are many lenders online who offer bad credit loans, but we recommend researching to see which accredited and trusted lenders offer the best rates and deals for your situation. If you find it challenging to secure some financial documents, search for providers of low doc commercial loans.
Another option is to speak to a loan broker and see if they can help to find the best bad credit loans for you.
If you find that you need more help or you are worried about your financial situation, you should seek money advice or support before applying for a loan.