What is a small loan for bad credit?
A same day loan is a short and quick loan designed for unexpected expenses. People apply for these loans to cover a broken household appliance, a car break down, an unexpected vet bill or other similar expenses that pop up. A bad credit same day loan is for those people who have worse credit. Thankfully a number of lenders will still work with those with lower credit.
What is bad credit?
TransUnion 0-550 is very poor credit
In the UK there are three credit agencies: Experian, Equifax and TransUnion.Each of them have different scoring systems that indicate different credit scores:
Experian 0-560 is very poor credit (or non existent)
Equifax 0-438 is poor credit and
What it means is you’ve been deemed a risk based on your history of borrowing or lack of history. It’s essentially your financial track record. Credit ratings aren’t fixed and change based on how fast you pay your bills and credit cards and proving you pay back debts or financial obligations.
How do credit checks work?
Your credit score is a key qualifier for banks and other financial institutions when it comes to pricing your credit. They’ll use your credit score to determine your interest rates and how much you can borrow. The lowest interest rates and most flexible loans are reserved for this with very good credit. If you have bad credit you’ll pay more interest and have less favourable terms.
The way lenders pull your credit is go to a credit agency and ask for your credit score a number from 0-1000 in most cases. These agencies compile credit and finance data and create a credit file for each person in the UK. This number continues to change as your credit history and financial history changes. Every time you open a new credit line or pay off debt the credit agencies note this and note if you missed any payments. Over a period of time, patterns develop illustrating how you manage money and debt. A good track record of paying debt on time and smart money management boosts your credit score whilst inconsistencies damage it.
Can you get same day loans with low credit rating?
Usually same day loans applicants get their money within 15 minutes of acceptance. However the time to approve a bad credit same day loan can take a bit longer. Based on a few factors you may be able to also get a same day loan this quickly with bad credit. Largely the questions are: how much do you want to borrow? The length of the repayment period and your personal circumstances (ie if you have a good job and salary it’ll be much easier even with low credit.) Some lenders will take longer than a day to approve you for a same day loan, but others if they can find a repayment schedule that works will approve you for a loan the same day. So bad credit loan approval depends on your circumstances and how much you want to borrow.
Unfortunately in the past people with poor credit didn’t apply for loans in fear they would not be approved. This meant a lot of people were using illegal lenders. Because of this the FCA has worked with legitimate lenders to offer quick loans and online loans for bad credit so more people can access credit.
Even with bad credit, most lenders will be more interested in your current employment, assets and living situation. So if you’re earning a decent wage and have worked with your employer a while then your bad credit is less relevant than you current circumstances.
How much can I borrow if I have a bad credit rating?
For same day loans you’ll be able to £50 to £5000. The repayment periods typically are from 2 weeks to 3 years, however you want to go for a shorter repayment period. For bad credit it’s better to choose shorter loan lengths as you’re more likely to be approved for the loan.
Difference between applying through lender and broker?
Applying via a broker has some benefits and some drawbacks. Firstly a broker will have a good idea of the entire market and will try to match you with a lender that suits your needs. They’ll also have a good idea of which lenders will work with you and save you time looking at offers from a number of lenders. The downside is that not every broker works with every lender, so you may be missing a better offer directly from a lender. Broker’s don’t charge any money as they get paid by the lender once the deal is signed, so the service is free. If you don’t have the time to check different loan offers, a broker can be the best bet.
Will applying for this have an impact on my credit score?
Yes, applying for a same day loan, will have a short term negative effect on your credit score. Many lenders will do a soft check first which won’t impact your credit so you can ask them to do that just so you can get an idea of the price of the loan.
Disadvantages of bad credit loans
Applying for same day loans with bad credit does have some disadvantages which are:
(i) It can take longer than a day to get approved.
(ii) You will get a worse interest rate.
(iii) You won’t get the same repayment schedule or length of loan.
(iv) You may need to provide more information on your employment, assets or loans.
What happens when you miss repayments?
Missing a payment on your same day loan can be a real issue, typically lenders will have late payment fees and if you miss payments for 2 months debt collectors will come to get what you owe. If you think you’ll miss a payment, call your lender and work out another way to pay. They may let you pay double the following month with no extra fee. If you do nothing it can snowball and get out of hand.
What to do when application declines
Try and work out why your loan was declined. Oftentimes a broker can help you with this and give you pointers to get credit ready. You can also work to improve your credit score by paying any overdue debts, credit card bills and enrolling to vote.