Bad credit doesn’t necessarily have to be a barrier to getting a loan. There are available options for lending money even if you do have bad credit. At guarantor loans we understand that everyone’s situation is different, and that a bad credit rating doesn’t have to stop you from borrowing money.
Everyone’s situation is different, but there are a number of reasons people may need to borrow money. Whether it’s to help out with unexpected bills or expenses or to improve their credit score. A guarantor loan may be a good option for those with bad credit.
‘Bad Credit’ guarantor loans are for those with a less-than-stellar credit report, or little to no credit history at all. Ordinarily, loans for bad credit may have higher interest rates and greater restrictions compared to other loan options.
This structure helps potential lenders reduce the risk of applicants not repaying their loan. However, these loans can prove to be useful if they are managed and budgeted accurately.
You may not find these advertised as bad credit loans however, this is an unofficial name for them. A loan that has a higher APR or interest rate will often cover customers with poor credit.
Bad credit guarantor loans are an extension of these types of loans. Adding a guarantor into the mix gives the lender additional reassurances that the money someone with bad credit is borrowing will be able to be repaid. The guarantor is put in place to pick up any payments the borrower may miss, and this is something that lenders are more likely to approve.
These types of loans have the advantage of allowing those with poor credit, or a non-existent credit history, to borrow money. While other mainstream lenders will shy away from these potential borrowers, some lenders and brokers are willing to allow those with bad credit to borrow money.
There are a number of benefits with this kind of loan, both in criteria needed to obtain one and in what it can mean for the borrower.
One advantage of a guarantor loan for bad credit is that they are generally unsecured. This means that you, or your guarantor, don’t necessarily need to be a homeowner. This lifts the barrier of entry considerably and makes them much more accessible than they may otherwise be. If you’re unsure on what an unsecured loan is vs a secured loan, check out our guide.
Another benefit of bad credit guarantor loans is that they can help those with a poor credit history rebuild their credit score. If you are approved for a guarantor loan and can show that you have paid it off efficiently and effectively, it will go towards improving your credit history and eventually your overall credit score.
With that being said, there are still a number of criteria you need to meet before you can be eligible for a guarantor loan, even if you can be accepted with bad credit.
Those applying to be a guarantor must meet the same requirements, among others, including passing a credit check. For more information on who can be a guarantor, check the full list of requirements in our guide.
There are two ways a bad credit loan can apply to you. The first is if you have a poor credit rating – which means you may be viewed unfavourably or as a risk to lenders and banks. This can make it difficult to borrow money.
The criteria for borrowing money varies between guarantor lenders. An easy way of seeing how you may be viewed is through a credit check.
If you have a low credit score, it may be because you have negative influences on your credit. This can result from:
The second reason you may be turned down for a loan due to your credit score may be nothing to do with debt or other issues. It could simply be that you have little to no credit history, which can create uncertainty for lenders and make them uneasy to lend to you.
The most common situation for this is if you are young and haven’t had time to build up a strong credit record. Another is if you have never taken out credit previously or have never opened a bank account. These are all fairly common circumstances, but it doesn’t stop lenders from being uneasy, as they often like to see proof that you can pay off debts.
Finally, if you have recently relocated to the UK, your credit cannot transfer across borders, giving you a lower (or no) score.
There are a number of things you can do to improve your existing credit score or build a credit history, and it’s worth looking into how you can do this.
There are a few options that you can apply for if you have poor credit, though it is important to consider affordability. You should borrow as small an amount as possible and make sure that you can afford to meet any repayments.
The options available to you include guarantor loans, personal loans, payday loans and secured loans. Of those, a personal loan may be the most difficult to secure, as many are dependent on a healthy credit score.
Payday loans provide a fast, short-term finance option, making them popular among borrowers. However, these loans often come with very high APR rates and could lead to large monthly repayments.
Secured loans require an asset, such as home, to be used as collateral to secure an approval. However, failure to meet your monthly repayments may result in losing your asset.
Guarantor loans are popular among applicants with a poor credit score. They require a financial partner to meet the monthly repayments if you can’t. It is an unsecured loan option based on relationships, but rates are generally lower than some other loans that are available to those with bad credit.
It is important to only apply for loans that you’re likely to be approved for. Each application, particularly with high street banks, will record a hard search on your credit report that can lower your score.
Check what guarantor loans you may be eligible for through the guarantor comparison tool on our homepage. You’ll be able to find the best guarantor loan for you, even if you need a bad credit loan.