How to Get a Loan if You Have Bad Credit

So, are you looking to make some much-needed home improvements? Maybe you are expecting a child and need to upgrade your car. Or perhaps you just fancy a nice break and want to take your family on holiday. But, your credit score is holding you back from securing the much-needed financial boost to make your plans a reality? Don’t worry! There are lenders that specialise in personal loans for those who have suffered with a bad credit score in the past. And, looking for these bad credit loans has never been easier so what are the options that are available to you?

Secured Loans

Secured loans require an asset of high value which is normally your property. What this means is that if you take out a loan and fail to keep up with the repayments, then your home could become the lender’s property. This type of loan is much easier to secure if you have a bad credit history because the lender has the security of your home as a financial backup.

Secured loans can be an excellent option for homeowners who are in need of a much-needed financial boost and are confident that they can make all of the loan repayments and on time. However, taking out a loan of this type isn’t a decision that you should make in a rush as it is a big financial commitment to make. Before taking out a secured loan, you must carefully evaluate your income and your outgoings to determine whether you can make the repayments.

Unsecured Loans

Unsecured loans are loans that are offered to individuals without the lender requiring a financial asset as security.  This means that the risk of not paying the money back in time is a lot lower compared to a secured loan. However, there are still a few drawbacks associated with taking out this type of loan.

In general, unsecured loans are much harder to obtain if you have a poor credit score, and if you want your loan application to be successful, you are likely to carry a much higher interest rate. However, this shouldn’t always be regarded as a negative thing. Unsecured loans are much easier to secure, and if you have a poor credit score that you want to improve, then this can be one of the most effective means of doing so.

Another drawback is that you default on an unsecured loan, the lender still has the legal right to take action against you in order to get the money back that they lent you.

Things You Can Do To Improve Your Bad Credit Score

Your credit score is a major key player as to whether you will secure any type of personal loan whether it be secured or unsecured. The better you have managed your finances in the past will mean that you are more likely to be offered lower interest rates on most types of credit and this also includes mortgages. And, apart from managing your finances and paying back any outstanding loans on time, there are a few different things you can do to improve your bad credit score.

Consider a Prepaid Card

Unlike a credit card, you don’t need to be credit checked to get a prepaid card. These cards are very simple to use and work in a very similar way to pay-as-you-go SIM cards.

Use Your Savings to Cut Down Existing Debt

One very simple and effective way of cutting down any existing debt is by using your savings if you have some. Although you may have a sense of comfort knowing that you have savings in the bank, it’s worth thinking about the benefits of parting with them. You will pay much less interest back plus you will have more credit available to you once the existing debt has been paid off.

If you have a savings pot in place for emergencies then don’t worry about using them to pay back debt. Because, if a situation does arise where you need access to additional finance then you will be able to use credit instead.

Check Your Credit Report for Any Mistakes

Mistakes can be made by banks and lenders which means that the wrong information could be passed onto credit reference agencies. This is why it is important to check your credit report every now and then to ensure that all of your financial information is accurate.

Register to Vote

The electoral register is one of the things that credit reference agencies check to confirm your identity. This is so they can double check for any fraudulent credit applications. Just registering reassures a lender that you are a real person.