Today I will take a look at getting a loan when you have bad credit. First of all, I would recommend taking a look at my recent post which looks at why you may have Failed a Credit Check. Checking your Credit Report will help you understand the reasons behind your Bad Credit so you can start to fix it again.
When you have bad credit your options for getting a loan are much more expensive and you will also find it more difficult to obtain approval. That being said in most cases it isn’t impossible to get a loan, just expensive. Here are some of the most common options available: –
- A Guarantor Loan.
- A short term / Payday Loan.
- Securing a Loan against your Car.
- Pawning Items for Cash.
This type of loan requires you to ask someone such as a Friend or Family Member to guarantee your loan. This means that should you not make your repayment, your guarantor will have to. The guarantor needs to be someone who has a good credit rating. You will still pay an eye watering amount of interest even despite this but you are much more likely to be approved for a loan.
An example of a lender who requires a Guarantor would be Amigo Loans who you have no doubt heard about from their Radio and Television Adverts.
Short Term / Payday Loan
This type of loan is usually easier to get if you have bad credit but again this comes with a cost. In this case the cost is the amount of interest you will be asked to pay.
These types of loans are typically between six and twelve months long and even borrowing a small amount can cost a lot in monthly repayments. An example of a lender who lends over a period of six months is Lending Stream. I have written a review of Lending Stream as well if you would like to find out more. There are many more lenders out there though.
I would personally avoid these types of loan as they are just too expensive. In fact in 2009 I got into a real mess because of my own poor actions but also because of Payday Loans.
Securing a Loan against your Car
If you have a car that you own outright, as in you don’t owe any finance on it, then you can usually lend against your car. Sometimes this type of loan is called a logbook loan. The same issues such as high interest apply and you risk loosing the car if you don’t keep to your repayments.
I would avoid this because if you do default, you could lose your car which could cause you all sorts of problems.
Pawning Items for Cash
Another option is borrowing against something such as Jewellery with a Pawn Brokers. This isn’t something I have done but it is an option that some people do use so just putting it in here for completeness. It is still an expensive way to borrow money too.
If you are a member of a credit union you may be able to borrow from them and at a much more friendly rate of interest. I would do this but I am not a member of a Credit Union. If you are you have probably already tried this but I still though it was worth a quick mention either way.
Getting a Car Loan with Bad Credit
I have written about this in another post. Head on over to Getting Car Finance with Bad Credit to find out more.
Getting Money in other Ways
Now we have looked at some options for borrowing money when you have bad credit, we will now look at other things you could do to get some money. If you only need a small amount of money then if it was me, I would try to sell something instead on eBay to get the cash that way. In fact that is usually my first port of call.
Another option would be to sell on Gumtree as that doesn’t cost you anything unlike eBay. This means you get the most cash for whatever it is you are selling.
The next thing I would do is to try and cut back on my expenses for a month to release the cash I need that way. This does take a lot of discipline and isn’t always possible in the real world.
As a last resort I might look to borrow on a Credit Card. However when you have bad credit your options are limited (bit of a common theme this isn’t it)?
Aqua Card might be able to give you a Credit Card but be warned, the interest rate is very expensive. I have written an Aqua Card Review as well so you can see what happens when you do get into problems with them. This should be a last resort though, plus it takes time to get the card.
Thinking about next time, depending on the state of your finances you could try and save a little each month. That way after you have saved for while you can lend the money to yourself, rather than pay some company a load of interest just for the privilege of spending their money. However it can be difficult in today’s climate to put anything away with pressure on your income and ever increasing costs.
I hope the above has given you some ideas, but also some thought into how expensive borrowing money when you have bad credit is. I speak purely from my own experiences of living with Bad Credit and just how much pressure the massive interest costs can have on your finances. If it makes you think twice then that is good and I didn’t waste an hour writing this!
Also one last shout, if you do decide to apply for credit you might want to check your credit report first. Have a look at my Noddle Review to find out more. Thanks!