How to Get Approved for A Loan with Bad Credit?

A bad credit history impacts one’s journey to achieve lifestyle milestones. It restricts one from gaining access to much-needed financial support. What could hurt more than a rejection on a loan when all you need is cash?

Eventually, it makes one wait. Meanwhile, you can improve your credit history. It will help you with instant approval and better loan terms. While building a credit score is healthy for your financial journey, what about instant cash needs? This is where bad credit loans emerge as a hope for poor credit profiles.

What does a bad credit loan imply?

A bad credit loan is for individuals less likely to get a loan approval. Individuals with CCJ, missed loan payments, and pending debts may consider it. The specialised loan providers dealing with bad credit history help individuals qualify. They look at the borrower’s circumstances. It helps them analyse whether they can afford the loan. 

For this, the provider analyses aspects like- income, employment history, rental payments, and current debts. If the profile reveals an improvement, the provider considers the loan application. The interest rates on a loan for a bad credit history stay competitive. It requires to be regular with the payments. Otherwise, it may impact the credit score further. 

Can you get bad credit loans without a guarantor and detailed checks?

The eligibility criteria for bad credit loans largely depend on affordability. A loan provider analyses different aspects to gauge payment potential. For this, he conducts a basic credit check. It is known as a soft credit check that does not harm the credit score. The check helps him analyse how likely a person is to repay the dues.

Individuals with fair credit, responsible finances, updated personal information, and consistent income may not need a guarantor. He may get bad credit loans with no guarantor and no hard credit check immediately. It reveals the potential of repaying the debts timely and is less likely to default. Some bad credit loans, like – short-term loans for emergencies, don’t require a hard credit check. Instead, you may qualify with just a basic and no-imprint check. It speeds up the loan approval process, and you get the money on the same day.

Alternatively, unemployed individuals with no proof of authentic income may require a guarantor. The guarantor acts as a guarantee to repay the debts on the borrower’s behalf. The person signing up as a guarantor should demonstrate responsible credit management. He must have a decent income and a fair credit score to qualify.

6 Best ways to get loan approval with a bad credit score

Qualifying with less-than-perfect score is challenging. However, you can improve your chances by taking a few initiatives on your part. For example, analyse the existing debts in your credit history. Check whether you can pay it all or part. It helps your credit history in some way.

 Firstly, it reveals your responsibility towards clearing existing dues. Secondly, it helps boost your credit score. An improved credit score increases the chances of a loan approval. Here are other ways to get quick approval on a loan despite a bad credit score:

1)    Understand the bad credit loan costs

Whether you need an urgent loan or to meet medium-term needs, research helps. Usually, you may encounter loan costs like- loan origination fees, loan closure fees, APR, interest rates, loan completion fees, etc. Here, APR (Annual Percentage rate) is the total costs that you pay on the loan, including the interest costs.  These terms affect the loan approval and the overall amount you pay. Knowing these will help you borrow the right amount.

Apart from these, educate yourself on additional costs. You may spot early repayment or prepayment fees, missed payment penalties or loan default penalties. Apply only to companies that provide a transparent view of costs.

2)    Use a loan calculator to borrow right

A loan calculator is one of the best ways to know the loan costs. You can check by choosing the loan amount, loan term, and interest rates on a loan calculator. It will help you know the exact amount you should borrow. Taking an amount higher than you can afford to pay may prove troublesome. It may further lead you into a debt trap. Individuals with poor credit scores must stay away from such happenings.

Choose an amount that fairly meets your needs and repayment capability. If confused, select a slightly low amount. It will help you avoid paying unnecessarily towards the debt. Moreover, you may qualify quickly compared to a higher amount.

3) Income should be higher than expenses

Loan providers consider incoming and outgoing payments during credit screening. Incoming implies the income sources like- salary, income from rent, investment, part-time job, etc.  Alternatively, outgoing implies- expenses that you incur monthly. 

It includes- paying rent, utilities, groceries, education expenses, transportation, etc. A significantly good income with balanced expenses may help you get a loan. Managing expenses is also one of the primary aspects that may help you fetch better rates. For example-

 You get approved if your monthly income is- £35000 and your monthly expenses total £14000. The reason is- affordability. If you borrow £10000, you may afford the loan payments easily. 

Thus, invest more effort in boosting your income prospects. You can consider working part-time or taking a raise within the present company. This will improve your credit score and chances of getting an affordable loan. 

4)    Consider an asset-based finance

Individuals with bad or fair credit history may consider a secured loan for bad credit. You must pledge one of your belongings equaling the loan amount or more. You can put ornaments, cars, property, and motorbikes as collateral on the loan. It is ideal for individuals who need an amount over £25000. However, unemployed individuals must provide one to get £10000 for bad credit. 

Asset-based finance helps you qualify for low interest rates. Moreover, it reduces your monthly loan payment amount and overall loan costs. 

The facility is also ideal for individuals confident about repayment. If you can manage the loan payments without fail but need better rates, you can consider it. If need more cash for the last secured loan payment, check instant finance solutions. 

You may get quick loans in the UK from direct lenders nearby. The 10-minute loan protects your asset from seizure and avoids penalty and credit damage. Yes, defaulting on a secured loan may impact your credit score drastically. Analyse your circumstances and choose accordingly.

5)    Analyse common loan rejection reasons

Like pre-qualification, it is the best way to reduce loan rejection chances. When you know the reasons behind common loan application rejection, prepare accordingly. Here are some common reasons that lead to bad credit loan rejection:

• Incorrect application form details or spelling errors
• Unauthentic income source
• Too many applications within a period
• Insufficient income
• Undergoing bankruptcy issues
• Thin credit profile or low credit history
• Unstable employment history

These are some common reasons for a loan application rejection. Thus, always re-analyse your application form before clicking apply. Moreover, read the reviews to prepare your profile for approval for a low-cost loan. Yes, the individual and genuine experiences of previous customers of the company may help you. It will help you avoid potential mistakes.

6)    Consider a credit build loan

Thin or low credit history is also one of the reasons for loan rejection. Limited or no credit history makes it difficult for the provider to analyse financials. It is the reason students, tenants, and long-term unemployed individuals struggle to qualify. Additionally, it also contributes to one of the reasons for low credit scores.

Thus, build a credit history before applying for a loan. You can take out a personal or credit builder loan for this purpose. Make regular payments on the loan for the loan term. In the case of a credit builder loan, you get the complete amount with interest by the end. It works like a savings account. Avoid missing any payment to achieve your credit improvement goal. 

Bottom line

These are common ways to get a loan for a bad credit score. Analyse the reasons behind your low credit score. Work on the errors and delinquencies. It will help you qualify for better rates on the loan. Moreover, an improved credit score grants you the power to negotiate loan costs. It eventually decreases the liabilities towards the loan.