While being approved for any kind of loan when your score is below average is difficult, it is certainly not impossible. These days, there are lenders who will consider applicants with a bad history of borrowing money. However, to run responsibly, these companies or people will look for other ways of guaranteeing they get their money back.
For instance, you may have heard of a ‘guarantor’ loan, whereby a trusted third party agrees to repay the amount if you fall behind on your repayments. Your guarantor will typically be a family member in a recognised professional (i.e. lawyer, teacher, accountant) that has a good credit score themselves and a reliable, steady income.
However, depending on your personal circumstances, this isn’t always an option. You may not know anybody with a high enough income to guarantee your loan; you may also feel uncomfortable asking them to. Either way, you’ll be grateful to know there are other options if you have a blemish or two on your borrowing record.
Some lenders will still work with you if you have poor credit. They will rely on information about your employment, income and other factors to decide your eligibility, and will probably ask for personal references to make sure you are a reliable borrower.
This can be a great way to get approved, but the money should come from a trustworthy source. Make sure you find a secure lending platform that will connect you with reliable lenders.
Bear in mind that these annual percentage rates (APRs) may be higher than other lenders. Look for APRs in the range of 5.99% and 35.99% to make sure you’re not paying through the roof for interest. This will only worsen your financial status in the long run, and it will take you longer to repay your borrowed amount in full.
It’s important to remember that future late payments will have an adverse effect on your credit score, so think clearly about how much you can realistically afford to borrow before you apply. If you’re applying to borrow money for a specific purpose – for example, buying a car or moving house – only ask for what you really need, and no more.
Be aware that your information will be closely scrutinized when you apply for a loan, particularly if you have a track record of making late payments. It helps to have a number of documents to hand, such as proof of income and a list of people who can vouch for your character, to improve your chances of being accepted.
If you’re applying for money to buy a car, it’s sensible to save up a decent amount of money for a down payment. The larger the down payment, the higher your chances are of being approved for a loan to cover the existing amount. The same goes for a mortgage, however this is obviously a more substantial sum and you are quite unlikely to be considered with bad credit.
If you are lucky enough to get approved by a lender, make sure you make all of your monthly repayments on time. This will grant you an opportunity to improve your credit score so that in the future you will be able to secure better borrowing with lower interest rates. You may be surprised how quickly you can improve your score.