There may be various reasons behind less than stellar credit score such as, you faced some financial crisis or you exhausted the money for any medical treatment or your children spent too much cash for completing the project and many such reasons. In this case, you fail to repay the amount on time, which lowers down your credit score and then you face difficulty to get a loan approved.
Millions of the UK residents depend on loans for stabilizing their financial conditions. It is very normal to get expected bills and you are not able to pay the debt so, in this case you applied for short term loans or long term loans according to the need but you find you have bad credit score and it’s true getting a loan with poor credit is not impossible.
People can easily get bad credit loans with no guarantor and no credit check. These loans were introduced only for those who carry a low credit score and want to avoid credit score perusal. Let’s understand the whole procedure to get a loan with a poor credit score.
How to get a loan with bad credit?
Credit score matters a lot at the time of getting a loan because based on this lender will decide the interest rate. In most of the cases, lenders prefer to lend money to those with excellent credit scores so, you can instinct the difference in the rate of interest means you have to pay more as compared to good credit score holders.
No matter what your score is, you should apply to various loans before getting an offer and check who is ready to provide with less interest rate.
1 Get information about your most recent credit score
It is mandatory to check your credit score before applying for any loan. These are dividing into five categories, look at them and see where you stand.
Very Poor: 0 - 560
Poor: 561 - 720
Fair: 721 - 880
Good: 881 - 960
Excellent: 961 - 999
The more your score is, the easier you will get loan approval. But you don’t have to be excellent or good to get it with less interest rate, but if you move down from good to fair and fair to poor then you may face the consequence in the form of high interest rate offered by a lender. However, customization helps to get an affordable deal.
2 Debt to Income ratio
Many money lending companies check debt to income ratio before providing a loan. What basically debt to income ratio represents is the portion of the monthly income of a person spent in debt. There are many online software programs available where you can calculate your ratio In most of the cases, lenders prefer not more than 35% this means this percentage of your income goes towards debt. So, it would be better if you check your debt to income ratio before applying for the loan.
3 Choose Secured loan
Secured loans like home equity loans, mortgages and auto loans seem to be better option as compared to the unsecured loan only when you can put any asset like a car or home as collateral. Here you can get a good amount but it is considered as a risk; in plain language lender will seize your home or car if you will not able to repay the money you owe.
4 Get into Credit Union
This one is another way to get a loan with poor credit. Basically, they are just like banks and they will not check you on basis of your credit score. But here you have to apply for their membership and they only grant this after checking your financial health, where you live and what job you do.
5 Go for online direct lenders
For getting a loan with poor credit you have to search for online money lending companies. You can get loans for bad credit with no guarantor and no fees from direct lenders. Before proceeding with a single company, do check multiple online companies and go with one that offers you the best APR.
6 Find a Cosigner with good credit
If the borrower is able to find a co-signer with an excellent credit score, then it will help to get a loan with less interest rate. But make sure you will repay on time because here, co-signer is equally liable to pay. If he/she shows trust in you then make sure you pay on time.