Securing a loan with bad credit


“I need a £500 loan today but I have bad credit, what should I do?” Questions like these are ever prevalent in a world that is still recovering from the economic crash of 2008. For more than a decade people’s wages have stagnated, job security has vanished and the cost of living has increased. This tricky trio has created the perfect storm whereby countless individuals are ever dependent upon loans for survival resulting in a bad credit rating. All hope, however, is not lost. If you are one of the millions who is looking to secure a loan despite your bad credit rating, rest assured that you do have a few options available to you.


If you’re fortunate enough to have a credit rating that is only just below what is deemed ‘sub-prime’ of 500-550, you might still be able to negotiate an unsecured personal loan with your bank. This could be a viable option if you wish to borrow smaller sums of money like £500, as the terms of the loan can fix the repayments over a shorter period. Be aware however that the interest rates are more expensive the shorter the duration of the loan. In addition, a bad to fair credit score will usually affect the terms of the loan in a way where you will be offered a less than top deal.


If your credit rating is too bad for you to acquire an unsecured personal loan, you might want to look at a secured loan. A secured loan will offset the risk that your bad credit rating presents to a bank, by securing the loan against your chosen assets like your house. In other words, if you fail to upkeep repayment of the loan the agreed assets upon which the loan would have been made will be repossessed by your bank as an alternative method of repayment. A secured loan is a great option if you know that you are going to be able to pay back the loan as it will offer lower interest rates and a flexible repayment schedule, but can be devastating if you default on your repayments as you could be made homeless.


If you’re not in a position to take out a loan due to your bad credit rating, you could apply for a guarantor loan. A guarantor loan is essentially a loan in your name, but if you fail to repay the loan a named guarantor on the loan will guarantee to make repayments instead. This type of loan is another way of getting at some much-needed cash, but it is essential that both you and your named guarantor truly understands the terms and conditions of what it means to be a guarantor. Bad Credit Site UK are known for their guarantor loans because they get the best rates.


Peer to peer loans take the power away from banks, and places it in the hands of your peers. In essence you are taking out a loan with your colleagues, friends or family which can be a blessing and indeed a curse. With peer to peer loans it is highly recommended that you draft up a written contract to be signed by both parties of the loan to ensure a legal framework if the loan becomes problematic for whatever reason (no repayments or hiking interest rates after the loan was leant, for example).

Remember no matter how stressed you feel with regards to your money troubles do NOT panic and make any rash decisions. When it comes to securing a loan that is right for you, you need to have done your homework, understood the terms of the loan and crucially made sure that you’re in a position to pay it back. Failure to think with a clear head could land you in more debt, shackle you with an even worse credit score and put your assets at risk.