very bad credit loans no guarantor no broker

February 24, 2021

How to Get a Loan When You Have a Very Bad Credit

By : Ellie Brown

A credit score plays a paramount role when it comes to
having a loan application approved by a lender. Even though numerous lenders
invite applications from bad credit borrowers, you need to meet affordability
criteria.

You will have to prove your repaying capacity, and if you are self-employed, you will have to submit a business plan and income statement of at least two previous years. However, it does not mean that the lender will overlook your credit score because you have proved your affordability.

When you have a poor credit rating, you still have a chance to have a loan signed off on. What if you have a very poor credit rating? A very poor credit rating restricts your chances of borrowing money. Even online lenders will hesitate to lend you money if your credit file shows your score extremely poor.

Many people think you will have a very poor credit rating only if a CCJ has been issued against you. This is one of the reasons. A record of continuous late payments and bankruptcies, high credit utilization ratio, and multiple credit inquiries also account for a very poor credit rating. It can be quite complicated to secure a loan when you have a very poor credit score, but you still have some option:

Take out a very bad credit loan

There are a few lenders that can entertain applications from very bad credit borrowers. Though you can qualify for very bad credit loans with no guarantor and no broker, you will have to pay very high-interest rates. Further, you will not be able to borrow a large amount of money.

You will have to check if you can borrow as much as you want. Do not forget to consider the repayment plan. Some lenders can allow you weekly payments, while others will want you to pay back the whole of the money in a lump sum.

Get a home equity line of credit

Getting a very bad credit loan is extremely complicated. If you fail to borrow money and need it urgently, you should consider borrowing against the equity of your house. However, this type of funding source is available to only those who own a house.

If you have equity in your house, you can borrow money against it at lower interest rates. Your house equity will be considered collateral for the loan. You will be free to use the money as you want. Do not forget that this will put your house at risk.

If you fail to repay your debt on time, you will likely lose it. Ensure that you have a steady income source so you will not have any difficulties in making payments.

Find a guarantor

If a lender is not ready to sign off on your loan application, you should find a guarantor. The guarantor must have a good credit rating. It is essential to note that the lender will look over the affordability of the guarantor too.

This is because if you fail to pay off the debt on time, the lender will call upon the guarantor to make the payment. Since the guarantor will enter into the loan agreement with you, it minimizes the lender’s risk. As a result, you can get the loan at affordable interest rates.

Getting a guarantor can be quite a time consuming because it would destroy the credit score of the guarantor if you fail to pay off the debt on the due date.

Take help from family and friends

If you need money urgently and do not have enough savings, you should consider borrowing from your friends and family. Of course, if you straight away go to them and beg for money, they will never lend you money.

A rule of thumb says that you should create a written agreement. Tell them how much money you need and how you will pay down the debt. If you cannot pay off in a lump sum, set monthly instalments.

 Make sure that the size of the payment you set is not very little. Since your friends and family will not be charging interest, you should be sensible and honest with your repayment plan. Discuss everything. Transparency is a must between you and them. Otherwise, they will not help you down the line.

If you have a very bad credit score, it can be challenging to get a loan. If you need money urgently, you can consider other funding sources. For example, you can see no guarantor loans, borrow money from your family and friends, and borrow money against your home equity.

You should try to improve your credit score if you want to borrow money down the road at better interest rates. Try to take stock of your financial condition and then see where you are slipping up.

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