The popularity of personal loans has been soaring in the UK with borrowing amounts going up four times faster than personal wages.
For people who have taken out personal loans in the past, that massive number probably isn’t as surprising as it seems.
Personal loans offer borrowers options when adversity strikes. Whether it’s for house repairs or unexpected car bills, when you’re living paycheck to paycheck, personal loans are there to help.
Unfortunately, getting a personal loan isn’t as easy as just filling out an application. In addition to ample paperwork, getting approved for a loan will have a lot to do with your credit rating, income, and other factors.
If you’ve been rejected for personal loans in the past, below, our team shares with you some tips on how you can improve your “get a loan with bad credit” odds on your next application.
1. Stop Applying for Loans
If you’ve faced loan rejection multiple times, it’s best that you take a break from applying for loans. Chances are, there’s something wrong with either your credit rating or the types of loans that you’re applying to.
Blind applying to a high volume of loans can adversely affect your credit rating which can then make it harder to get a loan with bad credit.
2. Check Your Credit Rating
The first step to understanding if you’re applying to the correct kinds of loans is to understand what your credit rating is.
Your credit rating is a score leveraged by UK lenders to understand how likely you are to repay your debts. If your credit rating is high, you’ll be able to seek loans from a higher volume of lenders and will get loan requests approved at a much higher rate. If your credit rating is low, you’ll need to be careful with your applications to avoid rejections.
You can learn your credit rating by requesting a credit report from Equifax or Experian.
There are also a number of websites that will help you pull your credit rating for free.
3. Look For Local Flexible Lenders
If after checking your credit rating you’ve confirmed your suspicion that you’re a sub-prime borrower (have below average credit) it’s now time to look for lenders that are open to working with people in your situation.
Big banks are likely to only want to deal with “prime” borrowers so you’re best off leaving them out of your loan search.
Instead, find small credit unions and talk to a teller about what your needs are and what your credit situation looks like. Not all credit unions will be able to help you but if you shop around enough, you may find one that’s willing.
4. Find Sub-Prime Lenders Online
If your local searches for loans have turned out fruitless, your next best option will be to take to the internet. There are thousands of lenders that loan specifically to people with below-average credit scores online.
The issue with these lenders is that many are predatory, meaning they charge exorbitant interest rates and a variety of fees.
Still, there are some online lenders that offer good deals to borrowers. Research as many as possible to see which ones offer the best terms.
5. Consider Payday Loans… Carefully
We don’t recommend going the payday loan route for borrowing because of the high interest rates and fees they charge. If you need extra cash now though, these lenders are a viable option.
Read reviews of payday loan lenders in your area to try and find ones that offer the best customer service and rates.
Use payday loans sparingly and only as a last resort.
6. Talk to Financial Planners
If you’re desperate to borrow money then chances are you could use some help managing your finances. Fortunately, there are a number of financial planners that are available to help.
While some financial planners charge money, others are free of charge through various community programs. A quick online search or a trip to your town’s main office should help you turn up free services in your area.
The more in order your finances are, the better you’ll be at managing your debt and the higher the chances you’ll have of getting approved for a future loan.
7. Find a Guarantor
A guarantor or co-signer is one of the most popular “get a loan with bad credit” options people leverage to get the approval they’re looking for.
Basically, if you can find someone to put their name down on your loan application with you and that person has a good credit rating, the lender will consider that person’s rating over yours.
If you default on your payments, your guarantor will be responsible for paying your debt. Because of that, finding someone to co-sign your loan can be difficult.
If you’re having trouble getting a guarantor, you can explore more loans without guarantor options.
Wrapping Up How to Get a Loan with Bad Credit
Just because you’ve been refused for a loan in the past doesn’t mean that you’ll be refused for one in the future.
Our recommendation is to follow our get a loan with bad credit suggestions above to improve your financial situation and your chances of getting the money you need.
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