When you have a bad credit rating, getting money in a pinch can feel like an impossible task. Many lenders and other organisations look unfavourably on those with a poor credit rating, so it can feel like you’re stuck in a loop which can’t be broken. What’s more, if it’s an emergency, the panic can start to mount as you feel like there’s just no way out; if lenders won’t give you money, then you won’t have any way to pay back the debt you’re struggling with.
Luckily, there are ways to get money in an emergency, even if you have bad credit. A low credit score is important, and will impact your financial life in a number of ways, but it’s not the disaster many have made it out to be. We’ve gathered a number of options for you if you want to get a loan and have a poor credit rating. There is, of course, a chance that you don’t actually know your credit rating; if this is the case, there are a number of services in the UK such as Experian and Noddle which will collate this information for you for free. And if you need a guide to building credit effectively then check out this guide by crediful.com.
1. Shop around for companies
There are, in actuality, a number of companies who are more than happy to provide loans for customers with poor credit ratings. If you do have a low credit score, you’re not alone; there are a huge amount of people in the UK alone who have struggled with their score due to unfortunate circumstances or sudden financial hardships. If you’re looking for a quick cash injection, then give LoanPig a try. Their short-term loans are ideal for those who aren’t on good terms with most lenders, and repayment is quick and simple. There are a number of companies just like LoanPig who will consider borrowers with a low credit score, so don’t despair; make enquiries and you’d be surprised how many positive answers you receive.
2. Try peer-to-peer lending
Peer-to-peer (or P2P) lending is a relatively new concept, having emerged along with P2P company Zopa back in 2005. Peer-to-peer lending effectively cuts out the middleman, pairing those who want to borrow money with those who have the means and inclination to lend it. Of course, you’ll still need to repay the money, and a credit check will still likely need to be carried out before you’re approved. The good news, though, is that P2P lenders are far more likely to approve loans, as they don’t simply look at credit score as the be-all and end-all of lending. If you can show that you’ll be able to repay the loan reliably, then you’re likely to be approved, bad credit score or no.
3. Try a credit union
Credit unions are basically banks owned by members in a cooperative style. Usually, credit unions are owned by people who have common areas of interest such as living in the same area or working for the same company. Members pool their earnings, which are then supplied to other members who need them with lower interest rates than regular loans. You may not have a credit union close to you, in which case this option unfortunately won’t work, but if you do, then this is the ideal option. It’s best to chat with credit union personnel in person or on the phone, if possible, because the organisations are a little more lenient and personable than the average bank. The customer service offered by most credit unions tends to be superior to that offered by major corporations, too, so it’s a win-win if you can find one near you.
4. Find a guarantor
Many loans will allow you to put down the name of a guarantor – someone who will pay the debt if you can’t do so yourself. Obviously, this option will only work for you if you know someone who’s financially solvent and capable of signing for the loan, but there’s a good chance you do. It doesn’t have to be a family member; it only has to be someone who will promise to pay the loan if you can’t. For this reason, it’s probably best it be someone you know fairly well, because you’ll be able to negotiate the terms and conditions with them before you sign. You will still need to pay the loan in full, of course, but if you can’t, then the loan company will look to the guarantor to do so instead.
5. Borrow from family and friends
In extreme circumstances, you may not be approved for a loan by any of the above companies or options. If this happens, you may want to look into borrowing from friends or family. Depending on the family member, you may want to extensively document this loan just like you would a regular one; after all, there’s nothing worse than falling out with family members over missed payments, as it might get personal. If, though, you know financially well-off family members who would be willing to help you, then you shouldn’t neglect this option.