If you are in the UK and have a bad credit rating the chances are you are either new to trying to find subprime loans or you have a fairly clear picture of the lending landscape. Either way here is a quick catch up. Lenders generally decline loan requests of people with bad credit history. During these difficult days, having a bad credit history as a result of missing payments or paying a few bills late is inevitable. Luckily, there is a new influx of lending companies that can provide loans for people with bad credit rating.
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Personal Loan Regulation in the UK vs other countries
It's worth understanding that bad credit loans in the UK are slightly different to those in other countries like the USA. In the UK there is no maximum APR and not as much regulation as you will find in other countries, the FSA does not regulate personal loans as it does things like debt management and so on, so you do have to be wary of how you approach things.
What does Bad Credit mean to a borrower in the UK?
These days bad credit in the UK means only a select few loans are available. The typical APR is usually a LOT higher than the normal high street lenders and this can mean anything from 40%-2500%. These numbers are scary but essentially your options are:
Doorstep loans - typical APR around 200%
Guarantor loans - typical APR around 42%
Logbook loans - typical APR around 30% using your car as security
Unsecured loans are going to be the hardest to get and most expensive but there are lenders like FLM Loans in the UK who specialise in guarantor loans for people who simply have nothing to use as security. Non homeowners, tenants and suchlike are all welcome.
Finding the right lender
The question is how to find the right company that offers such loans and how to apply for a bad credit loan in the UK? To start with, as you would in any country contact your friends and family and ask if anyone else has any relevant experience with obtaining credit. Use Google.co.uk to find relevant companies. Shortlist them according to your level of trust of them and maybe give them a call to see how professional they are. If they are willing to listen to your requirements and answer any questions then that's a tick in the box. As you're in the UK they must have a data protection licence and a consumer credit licence, get these details from them and check against the government records online to verify the company is legitimate.
More Option more Danger
As the demands for such loan is increasing, there are many lending companies from which you can get bad credit loans. However, beware as there are also many companies that charge outrageous rates, and other charges or fees. The best way to get approved for a loan if you have poor credit rating is to get an intermediary agency that will do the job for you. Some of these will charge you a fee to find a loan for you, avoid these, but always ask up front if they will try and charge you. If possible ask for the response in writing, there are some very unscrupulous lenders out there and they will do their best to rope you into their charge. There are some good guys out there and there are some that really will do their best to get you the best deal without charging you for the honour of doing so. There are even a few good places online that will come to your aid, I will come to those later in the article.
Dealing with brokers
If you apply through an intermediate company known as a broker, they will help you find the cheapest options or companies from which you can borrow money at the lowest interest rates. Most of these intermediate companies that offer help on loans for people with poor credit rating have a database of lenders that offer bad credit loans. They can help you get the best deal even if you have poor credit rating. When applying for such loan, it is also important to state a good reason what the loan is for. If you are buying a new car, setting up a small business, going on a holiday, a guaranteed bad credit loan is your best option. A guaranteed bad credit loan either requires collateral or a guarantor for your loan to get approved. You can use certificate of ownerships as collateral.
If you can comply with the requirements, you won't get a problem securing a loan as there are many companies that offer loans for people with bad credit rating. However, loan applications by the self-employed individuals, who also have poor credit standing, are unlikely to get approved because they do not have regular pay slips. Pay slips or proof for a good source of income is one of the major requirements in securing such loans.
Guarantor Loans have no credit checks and are perfect for people with bad credit
In the UK there are very few loans that require no credit checks. The most common type is known as a guarantor loan and it ensures access to loans for anyone and everyone so long as you have not been registered as bankrupt in the last few years. It works because while you borrow the money the responsibility for the loan is actually someone else's, someone who trusts you to pay the loan back but is also prepared to pay the loan back themselves should you fail to do so. As advertised by the 3 main guarantor lenders FLM Loans, Central Trust and TFS you will always be accepted for a guarantor loan so long as you have someone who is willing to take the responsibility for the loan. This is why it is the ultimate loan for people with bad credit.
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