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Getting a Loan if You Have a Bad Credit Rating

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Just because you have an adverse or bad credit rating doesn’t mean that it becomes impossible to borrow money.

The main difference will be that it will cost you more because you are deemed to be a higher risk to lenders. That means a higher Annual Percentage Rate (APR) will be applied to the loan by poor credit lenders when compared to the APR on a personal loan for someone with a good credit rating.

These rates, however, are still far lower and far more competitive than short term pay-day loan rates and preferable if you are looking to spread out your borrowing over several years.

There are two types of loan available to people with bad credit scores: secured and unsecured. With an unsecured loan you don’t need to be a homeowner but you may need to have a guarantor, someone who can step in and help pay the loan if you fail to keep up the repayments. A guarantor loan is classed as a secured loan, so the ‘guarantor’ is the security.

If you are taking out a secured loan the lender will have the security of the value of your home as a back-up should you be unable to meet the monthly loan repayments.

In most cases the APR on a secured loan is lower than on an unsecured loan, but carries more of a risk should you not be able to continue with the payments, so consider carefully before you proceed.

In both cases you will need to be over 18 and living in the UK. You will also need to be employed and possibly earning a minimum amount to borrow from poor credit lenders.

Whatever kind of loan you choose remember that borrowing over a shorter period of time will cost you less and only borrow what you need.

Consider the sums carefully to make sure you can keep up the repayments for the duration of the loan. As you would when buying any product or service, shop around to get the most competitive rates and the best terms and conditions.

Always read the small print and make sure you understand the terms of the loan, especially what might happen if you cannot keep up the repayments.

At Evolution Money there’s a different approach to helping borrowers find the right loan. As providers of secured loans for people who own their own home, Evolution Money provide a bigger picture approach, taking time to find out more about your personal circumstances and financial situation, as well as running appropriate credit checks.

Image: Freedigitalphotos.net/Stuart Miles

About Kim Parr

Kim Parr is a private practice optometrist, freelance writer, and personal financial blogger. You can follow her journey to 20/20 financial vision at Eyes on the Dollar.

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