June 12, 2019 7:04 am Written by

What is The Best Bad Credit Loan?

In the world of credit, loan, and lending, credit scores rule; for now until a new way to score our credit and our lives becomes used more often, meaning Social Credit Scoring.

But for now we are stuck with the same old way credit scores are calculated, using five factors:

* Payment history

* Amount(s) owed

* Time having credit

* Types of accounts

* New credit

These five (5) factors have been used and reused time and time again.

So if someone misses a few payments, gets overextended, or doesn’t have or use credit, they fail to have that elusive high credit score.

High Credit Score = Good

Low Credit Score = Bad

If lenders were to use the full spectrum of values and factors available to them such as what makes up social credit scoring, payment history, amounts owed, etc, etc etc, in addition to lifestyle, social media, your job, education, friends, family, purchase history, and much more, it would be easier for someone to get a better/higher score.

So for now, we are stuck with what we have, an antiquated credit scoring model.

And due to this old model, many people may find themselves with low credit scores, which to many lenders means, bad credit.

Just because you have a low or no credit score, does not necessarily mean you have had bad credit, but missing payments and being over-extended is a very good way to get a low credit score, wich then equates to bad credit.

But fear not my credit searching friend, there are lenders and loans out there for those who have low credit scores and/or bad credit.

Loans and credit granted, not based on credit scores, but based on affordability and other factors.

When swimming in the seas of bad credit loans, which one is the best to grab onto, what is the best bad credit loan???

That can depend, on you, the loan amount you require, and what you need the loan for.

Payday Loans: Payday loans are short-term loans of usually 30 days are less. They are loan of around £500 or less, and are due to be paid back on the borrower’s next payday.

Payday loans are easy to apply for, and quick to be approved for as they are based on affordability and the fact the borrower has a job and a bank account.

One issue with payday loans is that they come with high interest rates or APR’s/annual percentage rate.

The reason the APR’s appear so high, 1500%, 2000% or more, is due to the fact the interest rate, which is usually for 30 days, is expressed as an annual rate/APR. This still does not change the fact that the overall interest rates are high.

However, payday loans are easy to qualify for, and quick to approve and receive the money should the borrower experience a financial emergency.

Pros

* Quick approval

* No credit scoring

* Based on affordability and having a job and a bank account

Cons

* Short-term loan, due to be paid back on next payday

* High interest rates

Logbook Loans: Logbook loans are secured loans against a car or vehicle that has value. These loans are also not based on credit scores, but are based on affordability, and the fact the borrower has a car of value.

Pros

* No credit scoring involved

* Based on affordability and the borrower has a vehicle of value

* Payments can be for a longer term

Cons

* Borrower must have a vehicle of value

* The vehicle secures the loan

* Should the borrower fail to repay the loan, the vehicle is at risk of repossession

Guarantor Loans: Guarantor loans are personal unsecured loans based on two factors:

* Affordability

* The borrower has a guarantor

A guarantor is someone who knows the borrower, a friend or family member, and guarantees the loan should the borrower default on the loan.

Guarantor loans can have extended terms up to 60 months, five (5) years which makes the repayments lower. The loans can also have higher loan amounts.

Pros

* No credit scoring involved

* Based on affordability and having a guarantor

* Higher loan amounts

* Longer repayment terms

Cons

* Borrower needs a guarantor

Doorstep Loans: Doorstep loans or “the loan man” loans, are unsecured loans of small amounts, a few hundred pounds, offered by lenders who visit neighbourhoods and go door-to-door lending money.

The loans are paid back weekly, but are for low amounts and carry a high interest rate.

Pros

* The lender comes to your door

* Payments can be weekly

* No credit checks

Cons

* High interest rates

* The lender comes to your door

Credit Cards: Yes, there are credit cards out there for those with bad credit. And many use eligibility checkers to help you have an idea if you will be approved for the card or not, without affecting your credit score.

The final approval does require a credit check, and if approved, the credit limits are usually low with high interest rates. However, they are a way to re-build credit.

Pros

* A way to re-build one’s credit

* Easy to use and carry and can be used for online purchases

* Accepted most anywhere

Cons

* High interest rates

* Credit history is checked prior to final approval

* Low credit limits

As you can see which bad credit loan is best for you will depend on what the loan is needed for, and how much you require, and also you full borrowing or credit history and if you have a car or vehicle, or a guarantor.

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