It is widely recognized that obtaining a loan can sometimes be a challenge, particularly if the applicant has a low credit score. In addition, individuals with low credit scores typically have a very difficult time finding a bank or financial firm that is ready to loan them the sum they need and when the lender approves the loan, they charge a high interest rate which may lead to more problems. 
There are several types of loans that an individual can obtain, like a payday loans bad credit, short term loans, secured loans and many more.

Bad Credit Loans: What Are They?

But if you have a bad credit score, then you should know that there is something called a bad credit loan.

These loans are designed for individuals who have a poor or no credit history/score. But there is a catch to these kinds of loans, they come with a lot more restrictions and a greater rate of interest. All these rules and regulations are made to minimize the risk lenders take when they give out a loan to borrowers with a bad or no credit history.

There are several reasons as to why an individual may have a bad credit history, like
  • Delaying payments
  • CCJ (County Court Judgements) 
  • Higher number of hard credit checks
  • Not owning a bank account
  • If the borrower has not closed unused bank accounts, then it may bring down their credit scores.
  • Declaring bankruptcy
  • Not taking the time out to build a good credit score

How To Apply For a Bad Credit Loan?

It is obvious that lenders and financial institutions charge a very high rate of interest to borrowers with bad credit history because they bring a high risk factor to the lender. Furthermore, bad credit loans are meant for individuals who do have a poor credit score or no credit history at all.

When the borrower chooses to apply for this loan then he automatically agrees to the terms and conditions that come along with it, like making payments on time. If they fail to comply with rules they agreed upon, then they will face heavy penalties. There are several financial institutions and lenders who offer these bad credit loans but again obtaining one is not going to be a walk in the park.

Most of the financial firms let borrowers obtain a loan upto £2000, although there are several other financial institutions who offer a loan upto £5000. The time frame to repay these loans can be anywhere from 3 months to 36 months. Therefore choosing the loan type and the repayment period is of extreme importance.

Remember, a borrower can also conduct several soft searches without leaving a mark on their credit history and therefore, not affecting their credit score. This will help the borrower assess as to which lender is more likely to accept their loan application.

But there are certain requirements that need to be met if the borrower wants to apply for a bad credit loan, and they are - 

  • The borrower is required to be over the age of 18
  • The borrower is required to be a legal citizen of the United Kingdom (Britain)
  • The borrower is required to have an active bank account
The borrower is required to show the lender that they are more than capable of paying back the borrowed amount. 

There are several websites that help individuals by reviewing and comparing loans for people with poor credit history and scores and it will also further help in filling out the respective forms. Once the application is filled out, the websites will come up with a list of lenders who may offer the borrower their loan, this list is based on the application filled by the borrower.

But these applications will not be sent out to the lenders, which means that the borrower can compare and review the best lender for him and then send the application to them for approval. Once the loan is approved by the lender/financial firm, then the requested amount of money will be transferred to the borrower’s bank account. These loans usually get approved within a day.

Although few lenders are more sparing with the interest rates charged when it comes to bad credit loans, most of the lenders charge a higher rate of interest for bad credit loans, mainly because of the risk they are putting themselves in.

Once the loan is approved and transferred, the borrower is expected to pay back the loan within the specified period of time, if he fails to do so, then the borrower may face heavy penalties.Although the process to apply for a bad credit loan may sound easy, it is up to the lender to make the decision of approving the loan. This means if you apply for a bad credit loan there are chances that it may not get approved.

Also the borrower must make sure that he/she chooses a loan that is affordable rather than trying to get any bad credit loan approved. This is a wise pointer that everyone must bear in mind.
Here are a few tips for people with poor credit scores who want to get bad credit loan approved

  • Consulting local financial firms or credit unions to understand which option may be the most optimal for them in their current financial situation
  • Sending out applications to two lenders is a wise idea
  • Individuals with bad credit scores can take a co-signer with them, making sure the co-signer meets all the criteria set by the bank and that he has a good credit score is important because that will help in acquiring the loan more easily and also help them get better offers in terms of interest rates. 

  • These are some of the tips that people can keep in their mind when it comes to taking out a bad credit loan, furthermore, it is important to improve one’s credit score, it will help them greatly when it comes to taking out loans and having a good credit score means reduced rates of interest. With a good credit score, getting any kind of loan, be it small loans, payday loans, business loans, is easy.

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