Looking for a loan? Have you been refused credit by other lenders and the banks?
When making decisions on whether to lend you money, Banks and other lenders will consider many variables to determine how risky the potential loan will be. One of the key factors they will be looking at will be your Credit History. However, for those of you with bad credit, hope is not all lost… Together we will take a look at how lenders make these decisions and we’ll offer you a few insights into how lenders make decisions. We’ll even go that one step further and point you in the direction of lenders that may be able to help.
What does Bad Credit mean?
To understand the term Bad Credit, you need to understand your Credit Score and Credit History. As soon as you turn 18 and the dawning of your teenage years approaches, you are deemed responsible enough by the powers that be to take on finance in the form of loans. These loans can be in many forms, from Mortgages issued by banks, to Phone contracts agreements, right the way through to taking credit to buy a new TV. Nowadays, most UK lenders share repayment data of their customers with the main Credit Reference Agencies (CRA’s), and its these CRA’S who take all this lending and repayment data to calculate your unique credit score. This in turn is provided to other lenders when you apply for their loans.
How well you do at making your scheduled repayments on time, on your loans and credit agreements is a key variable in determining how high or low your Credit Score will be. If you have a low score you can presume you have Bad Credit. This means you are going to be deemed high-risk to lenders and may find it harder to secure loans. However, its not just about making payments on time that determines good or Bad Credit. There are several variables that need looking at here.
What Contributes to Bad Credit?
- Bankruptcy or Debt relief orders – This is as bad as it gets for your credit file. If you have been made bankrupt, or, entered into a Debt Relief Order in the last 6 years, you will it extremely difficult to take on any new forms of credit for a minimum of 6 years
- IVA – An Involuntary Arrangement is another major negative factor to your credit score. Again, this will stay on your credit file for 6 years. This type of arrangement is set up using Debt Management Companies who make small payments to each creditor on your behalf.
- Administrative Orders – This is a formal debt solution agreed with your creditors, and again will stay on your credit file for 6 years.
- CCJ’s- After defaulting on a credit agreement many lenders will take the matter to Court in the form of a County Court Judgement. Many do this as a way of enforcing repayment of a debt but to lenders looking at your credit file it shouts ‘DO NOT LEND’.
- Defaults – After several missed payments on a credit agreement a loan will default, meaning the company have been unable to recover payment from the customer. Having recent defaults on your credit file will put many lenders off lending to you
- Missed payments – If you are missing payments you are showing lenders that you either can’t afford to repay your current commitments, or you just don’t want to repay them. Either way it doesn’t look good and will make it harder to secure a loan.
- Over applying – Each time you make a loan application you are leaving a search footprint on you credit file. If you make several applications in a short period of time it is showing lenders that you are getting rejected by others, or taking on too many credit agreements at any one time.
- Maxed out Credit – When lenders look at your credit file they will look to see whether you have any overdrafts, credit cards, or other loans. Where they can see you are at your limits shows them that you are struggling to manage your priority bills as well as your credit agreements.
- Not on the Electoral roll – Lenders like to see that you have a fixed abode. When you are not on the electoral roll it makes recovering defaulted debt harder, which makes the initial loan riskier, and thus increases your chances of having Bad Credit
Do Fast Loan UK offer Bad Credit Payday Loans Online?
Yes and No…At Fast Loan UK we understand that your circumstances may change from time to time affecting your ability to repay credit agreements in a timely manner. We understand that you having Bad Credit doesn’t automatically mean you are likely to default on our loans. When making a decision on whether to lend we consider your circumstances today, and whether you can comfortably afford to repay the loan in a sustainable manner. Although we can’t ignore poor credit history, we take the time to get to know the customer to try and understand why this is, and whether the reasons are valid. This human approach to lending is the reason we do so well as a lender. Some of our most trusted customers have Bad Credit and have struggled borrowing with other lenders. The very fact that we put that little bit of extra time and effort into our underwriting process is recognised by our customers. This in turn makes them more loyal and less motivated to go silent when circumstances change affecting their ability to repay the loan in a sustainable manner.
What are Bad Credit Loans?
Bad Credit loans are simply loans from Payday (High-cost-short term) lenders who make credit available to those with poor Credit Scores. They do this by taking a more pragmatic approach to decision making and allowing flexibility in their approach. This is opposed to that of the traditional banks who have recent years moved away from the consumer lending in-favour of investment banking practices, which in their eyes are much more profitable.
Unfortunately, for the borrower, these types of loans are generally more expensive since they are unsecured against tangible assets and deemed higher risk.
However, the upside of this is that there are lenders out there like Fast Loan UK who offer these loans at a reasonable rate to people with Bad Credit. If all of the above resonates with you then maybe take a look through the rest of our website, or apply above to see if we can help you like we’ve helped thousands of others.
Who can apply For These Types of Poor Credit Payday Loans?
Anyone and everyone over the age of 18 that lives in the UK, subject to the lenders requirements. At Fast Loan UK you can be considered for a loan as long as you are in full, or part time employment, with a UK bank account and mobile number. Although, many of our customers have relatively good credit score we do accept those with terrible or what some might describe as very poor credit history as so long as we deem the loan affordable.
What are the Advantages of a payday loan for bad credit?
Those of you with bad credit will find it extremely difficult to get an unsecured loan with anyone other than a Payday Lender. This in itself is one of the main advantage of this type of loan. It serves a certain demographic of customers that the traditional Banks and Finance Companies won’t. Besides this, most Lenders offering Payday loans have adopted newer technology faster that big corporate banks, meaning that in most cases, the application process is really straight forward yet secure. A vast majority of Payday loan applications are now done on mobiles so accessing them is really easy.
Managing a payday loan is really simple – all you need to do is ensure enough money is in your bank account on your scheduled repayment date. Once a loan has been paid, borrowers are able to re-apply quickly using the lenders app or customer portal. We like to think of ourselves as a financial back up in your pocket for when unexpected costs occur, or those exciting one off purchases need to be made.
Being accepted for a payday loan and paying it back in time may also boost your credit score. It shows lenders you can be trusted to borrow from them.
What are the Disadvantages of a payday loan for bad credit?
There is no hiding from the fact that Payday loans are expensive in relation to traditional longer term borrowing options. Lenders justify these prices by providing credit to higher risk customers who statistically have a greater chance of defaulting. Lenders therefore must set a higher provision for writing off bad-debt at the end of the year. Charging higher interest rates helps offset these costs.
Taking out lots of short term loans may also damage your credit score as it shows other lenders that you struggle to manage your outgoings on a monthly basis. This means those with bad credit may see their credit worsen if they take out loans and don’t pay them back on time.
At Fast Loan UK we mitigate these negative factors by offering medium term loans up to 12 months with smaller more manageable repayments. We also limit how many, and how often customer can borrow from us. If we can see a customer has several other short-term loans we won’t lend.
Why is Affordability a Key Requirement for Lenders?
Ensuring a loan is affordable is both a commercial and regulatory necessity for all Loan Companies. As a lender it would not make sense to provide credit to someone who could not afford to repay the loan, as it would greatly increase the chance of that customer not being able to pay us back, which would come at a massive cost to us. Its also socially irresponsible to impose credit agreements on customers that they can’t afford. As well as lenders we are also human beings, and we don’t want to leave work thinking we have created harm to customers by facilitating a cycle of debt.