Bad Credit Loans | For Poor Or No Credit History | Experian
It really depends on your personal circumstances. For example, if you’re a homeowner you may find it easier to get approved for a secured loan. Or if you have little or no credit history, a guarantor loan could be an option. But both these types of loan have risks and might not be right for you.
So ‘what’s the easiest loan to get’ is the wrong question to ask. Instead ask: ‘What’s the best type of loan for me?’. If you’re not sure, have a look at the different types of loan – it’s important to know which type suits you before you apply.
How can I get better rates and higher limits?
You could consider a loan with higher risk
If you’re not willing to pay high rates, or you need a large amount, you may still be able to find a loan that fits your needs – even if you have poor credit. But usually, the trade-off is that you’ll have to accept higher levels of risk.
There are other types of loan for bad credit you may want to consider:
- Guarantor loans – where someone (usually a relative) promises to make your repayments if you can’t. Finding a guarantor with a good credit history can help you get a loan with better rates or a higher limit. But being a guarantor means potentially losing your own assets, such as your home, if you struggle to keep up with the payments.
- Secured loans – where you use your home, car, or another asset as collateral, meaning you could lose it if you fall behind on your repayments. However, collateral reduces risk for the lender, so they may offer you better rates or larger limits than you’d get otherwise.
- Debt consolidation loans – where you move debts from multiple accounts to a single loan. This type of loan may help you simplify your payments and reduce the amount you pay in interest. But they’re not for everyone. Even if the loan has a lower rate than your existing credit accounts, you may end up paying more in interest if the loan is taken out over a longer period.
- Credit union loans – you may be able to join a credit union. These are not-for-profit organisations who’ll look beyond a poor credit rating when deciding whether to grant you a loan. However, some credit unions restrict membership to people who live in a certain area or belong to a certain profession. Others insist you save with them first before you can borrow.
- Budgeting loans – If you’re on benefits, you could be eligible for an interest-free loan from the government. The maximum you can claim is up to £812 (correct as of May 2022), and the money must be used to cover essentials such as clothing, rent and food. You must be claiming certain benefits to apply. You can apply through the Gov.UK website.
Try and improve your credit score
Your credit score isn’t set in stone – it’s shaped by your financial behaviour, so you have the power to influence it. There are several steps you may be able to take to improve your score and increase your chances of getting the loan you want.
You can check your Experian Credit Score for free, and it’ll be updated every 30 days if you log in. And don’t worry – checking your score won’t affect it.
Managing your loan repayments
A ‘bad credit loan’ might come with high interest rates and low limits, but it can be an opportunity to improve your credit history by showing that you’re a reliable borrower. Over time, sticking to the loan repayment schedule should start to boost your credit score, helping you get better credit deals in the future.
Here are our top three tips for when you have a loan:
- Draw up a monthly budget and stick to it, so you never miss a loan repayment
- Try not to add to your debt while paying off the loan, as this may damage your score and put pressure on your ability to make repayments
- If you’re worried you won’t be able to make a payment, talk to your lender as soon as possible to discuss your options
Compare loans with Experian
Getting help with debt
If you’re worried about money, you’re not alone. There are many debt charities and companies that offer free independent advice for everyone. They can advise you, and could act on your behalf to help with any debts you might have.
MoneyHelper is a free, government-backed money guidance service – their site includes a handy Debt Advice Locator tool that can help you find confidential debt advice. Other places to turn include:
National Debtline
nationaldebtline.org
StepChange Debt Charity
stepchange.org
PayPlan
payplan.com
AdviceUK
adviceuk.org.uk