Understanding the Types of Bad Credit Loans and Their Uses

If you have been facing constant application rejections because of past credit mistakes like- pending payments, CCJs, bankruptcy and other issues, you may have bad credit.  Getting a loan with a poor credit score is challenging with mainstream lenders. This is because every provider prefers a credit profile with well-managed finances.

Individuals with no or minimal debts have good credit ratings and get the loan instantly. Alternatively, individuals with low credit scores struggle to qualify. The profile does not reveal the credibility to get the money and interest back.

However, there is nothing to get disheartened about, as you can still get loans. Some providers deal with low credit profiles and help them by providing bad credit loans.

What does a bad credit loan imply?

Loans for bad credit scores are for individuals with poor, weak or no credit history. It is for individuals less likely to be approved for a loan with traditional lenders. Instead of relying the approval solely on an individual’s credit history and score, the providers analyse the affordability profile. It implies that individuals with regular income, long-employment history and stable if not sound finances can qualify for the loan.

Who can get a loan for bad credit history?

The criteria for a low credit score loan are similar to any other loan. It’s just that the income or affordability matters the most for approval. Here are the criteria to qualify:

  • You must be 18+ to apply for the loan
  • Should be a UK citizen with a relevant bank account
  • The borrower must have an account with direct debit facility
  • Must have earnings above £8000/month(minimum) to get the loan
  • Should be able to meet the regular payments

How do bad credit loans differ in uses and purposes?

Bad credit loans are a broad term that covers short and medium-term loans underneath. There are different types of bad credit loans to check for your needs. Each loan has a different purpose. Individuals must apply after analysing everything. Here are some loans for bad credit that you can apply for your needs:

1)     No credit check loans

These loans require no detailed credit screening to qualify. It is a short-term loan for emergencies that one gets without impacting the credit score. It is ideal for a poor credit profile. You can tap it if you need a quick sum of up to £3000 without impacting your credit score.

2)     Payday loans

Although payday loans require a stable credit history to qualify, you may get one by providing detailed income proof. It is because these loans are income-based loans that mandate employment as the primary qualifying criteria.

As the loan is tied by the payday, you must pay the dues within 30 days of loaning the amount. You may qualify for an amount of up to £2500 for your short-term needs.  You just need to show the payslip to get the payday loan.

3)     Loans for the unemployed

As you can read, loans for the unemployed are for individuals with limited income. These assist individuals starving to create a minimal living. Individuals can apply for unemployed loans to get instant cash assistance up to £5000 for their lifestyle requirements.

However, the applicant must provide additional proof of part-time income as a subordinate to benefits he receives from the government as an unemployed. You can extend the term of your loan repayment if your present financial situation changes.

4)     No guarantor loans

It is for individuals struggling to get minimal cash assistance because of low finances but cannot get a guarantor either. These individuals may want to keep the financials a secret or have no one in the town to rely on finances.

If you can relate, no guarantor loans can be your fetch. However, the interest rates on such loans remain competitive. By making regular payments on the loan, you can reduce your liabilities interest rates and costs.

Usually, no guarantor loans require one to host an incredible credit history and profile. It helps the provider analyse the payment capacity better. However, if you have poor credit and need very bad credit loans from direct lenders nearby, you must have a high income with good monthly savings to qualify. It is because the poorer your credit score is, the limited chance you have to qualify for no guarantor loans. However, good earning capacity may save the day.

5) Debt consolidation loans

It is one of the most commonly used bad credit loans. Around 70% of individuals with fine financial knowledge and credit cards struggle with constant debt.  The situation impacts the credit history, credit score and the potential to save enough given the liabilities.

 Thus, debt consolidation loans help individuals reduce excessive debt burden with consolidation. It helps reduce your monthly liabilities and boost your credit score. Identify whether choosing a debt consolidation loan for your needs is the right move or not. If yes, you will pay the loan in a single installment for the lower term.

6)     Fast loans for your needs

It is one of the popular loans for bad credit history that individuals apply for. You get the money within 15-30 minutes as you apply for the loan. However, this loan is exclusively for emergency purposes. Identify the applying procedure and the eligibility to qualify the loan.

Usually, the qualifying status remains the sum just the payment proof is different. You must provide a relevant income proof in the form of bank statements, salary slip, part-time income to get the loan. Once you qualify for quick loans in the UK from direct lenders for your needs, you can get cash in 10 minutes to your account. It is the best and swift way to deal with tax. Moreover, the information you provide should be true to your knowledge.

7)     Home improvement loans

Getting a home improvement loan with a poor credit score is indeed challenging. It requires constant dedication from the member to qualify for the loan. Usually, there are secured and unsecured home improvement loans to apply for. You can check any of these to update your home’s structure, re-construction, re-installing flooring, replacing kitchen tiles, etc. It is a long-tenure loan that lasts for about 15 years.

Bottom line

These are some popularly used bad credit loans and their uses in regular lives. You can use any of these loans according to your requirements, credit history and affordability. It is not necessary that every loan has the same requirements. A lender may ask for additional details like a guarantor or security if your finances do not suffice the requirement. Thus, evaluate your needs and loan possibilities for bad credit qualification. It will help you avoid mistakes.

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