Can You Get A Loan If You Have Bad Credit?
Although the banks have promised to start lending once more, many people are finding that mainstream credit is hard to obtain as they had their credit files tarnished during the credit crunch. Some lenders are willing to consider applicants with a less than perfect credit history.
To prevent your credit score from worsening it is important that multiple applications for loans are not made, as this is usually viewed by lenders as a sign that you are struggling financially. To get a loan approved when most high street banks will refuse you means you must restrict any applications to lenders who are more likely to view a request for credit more leniently.
As a general rule, most high street banks operate far tougher lending criteria than can be found either through brokers or on the internet, so in order to get the best deal if you don’t have perfect credit, a bit of research is required.
However, just because your credit history is not immaculate does not mean that you should approach lenders who look less than scrupulous. There are a lot of dodgy dealers out there who will say they can arrange a loan in return for a fee and will then vanish with your cash.
There are a number of perfectly legitimate lenders who will provide credit to those with a bad credit history, but in return will charge a higher rate of interest. Payday loans are a rapidly increasing market and one which more or less anyone can access, no matter how severe their financial problems have been in the past.
The downside to payday loans is that they are usually only set up for the short-term – to last until payday, hence the name – and charge extortionate rates of interest. Whilst payday loans have undoubtedly helped thousands of people through a sticky patch, they are an expensive way to borrow money and not suitable for longer term lending.
Another up and coming way of getting a loan is via a peer to peer network. This type of community lending has been in place for centuries in some areas but is relatively new to the commercial market. Peer to peer lending is different than a bank loan as the individual advertises his request on the site and potential lenders offer the relevant rate of interest they think is appropriate to the risk. The borrower can then decide whether to accept the offer or not.
An alternative for those who are finding it difficult to get the credit they need is to arrange a co-signer on the account. This provides lenders with a much greater degree of comfort that the loan will be paid. However, the co-signer will have to understand that they are effectively taking responsibility for the loan and failure to repay it could wreck their credit rating too.
The plus side of getting any form of formal credit is that paying it back promptly will improve the credit record, which eventually will mean mainstream credit may be an option once again. It is possible for those with bad credit to obtain a personal loan from a traditional finance organization, but the options are likely to be limited. Comparison sites such as money super market can often provide an idea of the criteria each firm operates.
