For those with bad credit, getting a loan can seem an impossible feat. Bad credit doesn’t always mean that you have a large amount of outstanding debt. There are endless factors that can impact your credit score. However, regardless of the amount of your outstanding debt, if your credit score isn’t great, many lenders are likely to reject your loan applications. Sometimes getting a loan is important to help you to move forward or make a large purchase. Fortunately, there are options available to those with bad credit, in the form of short-term loans from selected lenders. You will likely pay a higher interest rate than somebody with a better credit score and have to repay the loan over a shorter period, but there are lenders out there that will offer loans to those with a poor credit history.
Finding Loans for Those With Bad Credit & The Application Process
As with most loans, finding one that suits your preferences can be better achieved through a comparison website. The majority of bad credit lenders allow you to apply online or over the phone. Generally, you’ll be required to complete an application that outlines your current financial situation, income, outgoings and outstanding debts. Once you’ve provided lenders with the required information, your application will be processed, and the lender will decide on whether to move forward and offer you a loan. The time that it takes for your application to be processed is dependent on the provider and whether you’ve provided all of the information needed.
If My Loan Application Is Approved, When Will I Receive the Money?
The amount of time it takes to receive your money after your application is approved varies, but some lenders will pay your loan into your bank account within a few hours of approving your application. Sometimes, you’ll need to review the terms and conditions of your loan and accept these before the money is released to you.
Applying for a Loan Directly Through a Lender Vs Through a Comparison Website
When deciding whether you should apply for a loan through a comparison site or directly via the lender, there are a few things to consider. Most lenders will have a website that you’ll be able to apply through if you have researched the best deals available to you. However, many lenders offer short-term loans with unfair terms, and some may not hold the correct licences required to provide loans. Legitimate and reputable lenders will be regulated by the Financial Conduct Authority, which is an important detail to look for when applying for a loan online.
Different lenders will offer different terms to customers. Without using a comparison website that considers a range of factors based on interest rates and loan terms, it can be not easy to know whether you’re getting the best deal available. When shopping for products online, most people shop around to find the best deal, so it should be no different regarding financial products. Comparison sites allow you to compare an array of lenders simply, without having to trawl the internet.
What Are Credit Brokers?
A credit broker allows you to submit a loan application to them and have it reviewed by selecting lenders that the broker trusts. This means that you won’t have to complete multiple loan applications if a lender rejects you. Brokers have several trusted lenders that they work with, which means you’ll have a higher chance of having your application approved. Furthermore, brokers only work with reputable lenders that are FCA approved. You may receive several loan offers from various lenders due to your application being shared with several lenders. This means you can choose the best deal from the offers that you receive. Although some brokers charge customers for application services, most do not charge any upfront fees.
Can You Apply for Bad Credit Loans Over the Phone?
Applying for a loan over the phone can be a very complicated process, which means that it can be easy to get things wrong in your application. Online applications allow customers to review the information they provide before submitting, which isn’t as easy when applying over the phone. Most lenders won’t allow you to apply for a loan over the phone and require you to complete an online application instead. Some short-term bad credit loan lenders will let you apply over the phone, however. Applying for a loan over the phone isn’t recommended if you have other options available to you. It can be not easy to process the information and terms and conditions attached to the loan over the phone. It is far simpler to have these in writing for you to review before accepting a loan.
Can You Apply for Bad Credit Loans at a Brick & Mortar Loan Provider?
Some people prefer to discuss their finances face-to-face and visit a physical loan provider when looking for a bad credit loan. However, this isn’t usually the best way to apply for a loan if you have poor credit. Without comparing a selection of lenders, you may end up with a bad deal. Online lenders can offer better deals, and comparison websites and brokers allow you to compare them without having to leave your home easily.
Are Bad Credit Loans the Only Solution If You Have a Poor Credit History?
If you need a loan quickly and cannot source the money you require elsewhere, then a bad credit loan may be the best option. However, it would be best if you could afford the monthly repayments and understand the loan terms you choose. You will pay a higher APR and interest rate than what you’d expect from other types of personal loans, so you should be sure that you understand this before you agree to receive the loan. If you can positively impact your credit score, this is recommended before committing to a bad credit loan.
Contrary to what some people believe, APR isn’t the same thing as an interest rate. However, both APR and interest rates work together to define the amount that an individual pays on a loan. The APR on a loan is made up of the interest rate and any other fees associated with borrowing the money, as outlined by the lender. There will be no fees associated with the loan in some cases, and a customer will only pay interest rates. In these instances, the APR remains the same as the interest rate. However, loans that do not have any other fees relating to them will often require the customer to pay an upfront fee, which will increase the APR.
Understanding Interest Rates
The interest rate on a loan is the amount you are charged for borrowing the money. The interest rate is displayed as a percentage and means that you must pay a percentage of that amount on top as well as pay the loan amount back. The interest on a loan is factored into the monthly payments that you agree to when repaying a loan. Interest rates are usually fixed on personal loans, but some lenders may state that interest rates are variable. A variable interest rate means that the amount of interest you pay on the loan may vary during the loan term.
Factors That Can Affect Interest Rates and Apr
Interest rates and APR can vary greatly between lenders, which is why it’s imperative to compare bad credit loans before choosing one. The amount of interest that you pay and any other associated fees can depend on the term of the loan, your credit history, and the amount that you wish to borrow. If you wish to pay your loan back over a shorter period, then you’ll pay less overall in terms of interest and APR. The amount that you borrow can also be a determining factor. Usually, the less you borrow, the less you’ll pay in interest and APR. However, some lenders will offer a lower APR for larger loans. If you have bad credit, you’ll usually pay a greater APR and interest rate than someone with a good credit score.
Other Charges Associated With Loans
Aside from interest rates and APR, there are other fees that you need to be aware of when choosing a loan. All of this information will be provided to you by your lender when you apply for a loan, but it can be easy to miss. For example, early repayment fees can catch some people out. Often, if you want to repay your loan early and not complete the loan term, you’ll be charged a fee. This is because lenders rely on interest and APR payments from customers to make money. So if you repay your loan early, the lender essentially loses out. Early repayment fees are usually substantially less than you’d pay in interest and APR over the term of the loan, however.
Origination fees can also stump customers. These are the fees that are often charged for setting up a loan. Of course, you won’t always be charged these, but you will likely be charged an origination fee in some form if your loan has a very low APR.
How Long Do Repayments Usually Last?
If you’ve never had a loan before, you may wonder how long you’ll have to pay monthly payments. This depends on how much you borrow and the term that you choose to repay the loan over. Most lenders will let you choose the term of your loan, but some may have a minimum term. Also, there will be a maximum term associated with your loan. This often increases depending on the amount that you wish to borrow. For example, if you wish to borrow £1,000, a lender may offer a loan of this value with a maximum term of 36 months, whereas if you chose to borrow £4,000, the maximum term might increase to 60 months. Minimum and maximum term lengths will depend on the lender that you choose.
When choosing a term length, ensure that you choose one that you will comfortably commit to. Although it can be tempting to choose a shorter term to save on fees and interest, sometimes it can make more sense to increase the loan term so that you can comfortably make the repayments.
Information That You’ll Need to Provide to Get a Loan
You should be prepared to give a substantial amount of information when applying for a loan, and you’ll also need to ensure that the information you provide is accurate. Although it can be frustrating to have to go through a comprehensive application, completing loan applications accurately and honestly can increase your chances of getting your loan. Besides, if you go through a broker, you’ll only have to provide all this information once.
You will likely need to provide your address history and personal details such as your date of birth and possibly copies of your identification. You’ll also need to have details relating to your income; this may mean providing payslips or bank statements to prove this. Most lenders will also ask for information regarding your current monthly expenses to enable them to lend responsibly.
In summary, applying for a bad credit loan can be frustrating but can be made easier if you use a comparison site and a broker. You should thoroughly look at the terms of every loan that you consider before committing to it and be sure that you can make the repayments. Before you apply for a loan, you should consider any other options available to you. If you decide to apply for a loan, you should ensure that the lender you choose is FCA regulated and ensure that you understand the terms and conditions relating to the loan. Always think carefully about the repayment term when applying for a bad credit loan and the interest rates and APR.