What are small loans for bad credit?
Credit scores are complicated things.
It seems like we spend our whole lives struggling to build our credit score one tiny point at a time. You can be careful with your money from the day you get your first bank account, focus on paying every bill you have on time, and still find that you end up with a bad credit score the first time you accidentally miss the date on a payment by just a single day.
How much would you like to borrow?
Representative Example: Rates from 49.9% APR to max 1333% APR. Minimum Loan Length is 1 month. Maximum Loan Length is 36 months. Representative Example: £250 borrowed for 30 days. Total amount repayable is £310.00. Interest charged is £60.00, annual interest rate of 292% (fixed). Representative 669.35% APR (variable).
While credit scores take years to create, they can also take seconds to destroy.
The question is, what do you do when your credit score isn’t perfect, and you need to borrow money quickly?
Small loans for bad credit could be the solution.
How Do You Define a Bad Credit Score?
Before you can decide whether you need a specialist bad credit loan, you’ll first need to figure out whether you actually have bad credit.
Importantly, there’s a difference between having bad credit and having no credit because you’ve never needed to take out a loan before. Unfortunately, if you’re applying for a fast loan cash advance or mortgage now and you have no credit, then you may still be rejected because the loan company won’t have any evidence to prove that you can pay what you owe back on time.
A credit score is the FICO score that runs on a scale from 300 to 850 in most cases. If you’ve got a score over 670, then you’re okay, and you should be able to borrow money without too much of a problem. On the other hand, if you’ve got a score between 580 and 669, lenders will generally call your credit score “fair”. A fair credit score means that you might not be able to access the best loan products, but you shouldn’t be rejected either.
Problems start to arise when you’re under the score of 580. If you have a FICO score lower than this, then you’re defined as having bad credit, which means that companies simply can’t be sure whether you’re safe to lend to or not.
Maintaining good credit throughout your life by paying your bills on time and making sure that you never default on a loan is the best way to ensure that you never have to handle the repercussions of bad credit. However, as most consumers know, managing your credit can be easier said than done.
How Your Credit Score Affects your Loan Options
Having a bad credit score isn’t just a mark on your financial reputation, it’s something that can make your whole life a lot more difficult. Lenders from all environments use credit scores to decide who they’re going to give money to, and what kind of interest rates they should provide to those people. A credit score that’s bad often means that your lenders are less likely to approve you. This can be the case whether you’re applying for a big loan like a mortgage, or even just a small payday loan.
Credit scores can also affect other aspects of your life, by making it impossible to get car finance so you can pay for the new vehicle you need over time, rather than dealing with a huge lump sum. In some cases, employers even check the credit scores of their new employees to see whether they can be deemed “responsible” or not.
Obviously, a lot of your success with finances in the future will depend on your credit score – but this isn’t always a fair thing. Sometimes, you can end up with a bad credit score for perfectly innocent reasons. Life isn’t always predictable, and problems can happen with your money that were beyond your control. Unfortunately, your credit score doesn’t tell future lenders why you failed to keep your rating up.
The good news is that if you need money fast and you don’t need to borrow too much straight away, then you could still be able to access small loans for bad credit from specialist providers.
What are Small Loans for Bad Credit?
To understand how small loans are offered to people with poor credit, the first thing you need to do is define a “small loan”. Small loans are unique in the lending industry for a lot of reasons. First of all, they’re usually restricted to less than £1000, which means that you’re probably not going to use them to pay for your new house or a brand-new car. However, you could easily use a small loan if you needed to borrow a little extra money to repair something in your home, or make ends meet until your next payday.
Another important thing to know about small loans is that they’re usually designed to be paid off as quickly as possible. The idea is that you pay your loan off on your next payday, so you can reduce the risk that comes with adjusting your budget over the long-term and get rid of debt as soon as possible too. Because small loans are limited in size and only last for a short period of time, lenders can be more comfortable giving them to people with bad credit.
However, it’s often a good idea to specifically apply for a loan with a company that offers support for people with bad credit- just in case. This can reduce your risk of being rejected for any credit that you apply for. Remember, every failed application that you make for money will leave yet another black mark on your report, which future lenders can see when they’re assessing your profile.
Can You Get a Bad Credit Loan?
Bad credit loans are often much easier to successfully apply for than standard loans. More often than not, you’ll be able to apply for this kind of lending using a basic form online that asks for some information about who you are, where you live, and how much you earn. The lender will need to make sure that you’re over the age of 18 and living in the UK before they conduct a credit check.
Despite what you might have heard, small loans for bad credit aren’t available without a credit check. Even payday loans and other small lending options still require lenders to look at your credit under the rules of the FCA. This helps the lender to understand your position as a lender and make a more informed decision about whether lending to you is a good idea.
Fortunately, companies that specialise in giving people money with bad credit also look beyond your score to assess other things, like how likely it is that you’ll be able to afford your new loan. Some providers might ask for information on how much money you spend each month, and how much you earn, to calculate the leftover cash that you can put towards repayments.
Payday lenders also look at things like your employment status. If you’ve been in a gainful job for a while now, and you’ve got a regular source of income, then it’s unlikely that you’ll need to default on your loan. Your bad credit loan provider will be able to take all these factors into account when deciding whether to lend to you.
Why Borrow Small Bad Credit Loans?
Sometimes, loans for people with bad credit can come with a few downsides, like slightly higher interest rates or fees than the loans available for people with good credit. You may also find that you can’t borrow as much money as some other people who might ask for credit, simply because your lender doesn’t think it’s a good idea to put that much financial strain on you when the time comes to make repayments.
However, there are significant benefits to getting a loan with a bad credit loan provider too. These companies understand that people who have bad credit don’t necessarily have a bad time managing their money. They’re willing to give people a second chance to prove that they can be trusted with all kinds of cash advances. Bad credit loan companies also offer:
- No judgement lending – you usually won’t have to explain why you need the money
- An easy application process that you can finish online
- Quick payments into your bank account when you need access to money immediately
- A quick all-in-one repayment to get you out of debt as fast as possible
- Support and guidance from a friendly team
You might even find that your credit score improves after you’re finished paying off your loan, because you’ll have had an opportunity to prove to the credit bureaus that you can pay the money you borrow back on time.
Getting Loans with Bad Credit
Getting a loan with poor credit is often an exhausting experience – particularly when you’re applying with traditional banks. Fortunately, companies like Boutell can help you find the credit companies that are willing to support you – no matter your situation.
Having a poor credit rating doesn’t have to mean that you’re out of options for your instant loans for bad credit. Contact us today to find out more.