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An unfortunate truth in modern time is that many people have bad credit score but they are in need of loans and struggle to get one. This situation indicates that the process of getting a loan is not as simple as it used to be in the past. But thankfully, the availability of loans for bad credit with no guarantor for borrowers means that a source of funding still exists.
The reason behind the number of increasing bad credit borrowers in recent years is due to the state of the economy. A surge in job losses has resulted in more loan defaults and missed repayments, both of which impacts an individual’s credit score badly.
Finding a suitable loan can take some time and proper research. But when it comes to finding a loan with a low credit score, it can be very challenging. But why? Actually, lenders are hesitant to provide loans to such borrowers unless it is protected by high-interest rate and some sort of security.
But that doesn’t mean that poor credit borrowers don’t have any option. There are many lenders who provide competitive terms and conditions and approve loans with a poor credit score. Getting a loan with less-than-perfect credit score is made possible through the introduction of specially designed loan product from direct lenders. But the question here is can these loans make any difference or will they only add problem to existing debt?
Here, we will explore the options available for bad credit borrower who are searching for a loan. There are three popular avenues:
- Traditional lenders,
- Online lenders, and
- Private lending agencies.
We will go into the details of each type of lenders one by one.
- Traditional Lenders
Generally, a traditional lender doesn’t show a willingness to offer a loan to someone with a poor credit score. But some lenders show a willingness to take the risk involved in lending to an applicant with an adverse credit report. The reason behind it is the purpose of the loan. Approving a loan application for indecent credit is assumed as less risk than a standard loan. The borrower definitely would like to improve his situation by repaying on time.
The only drawback is that lenders charge a high rate of interest on these loans, more than interest on normal loans. It also depends on the amount taken and the policies of lenders. And, to hold any chance of approval with low credit score, the applicant must be an account holder of the bank and may need to give some security as well.
There are some benefits of this agreement, despite the high-interest rate. Firstly, loan approval is more likely to take place if your relationship with the lenders is good. Second thing is that they already know your credit record. Finally, they are much likely to soften their policies, such as extending the repayment period to make the repayment more affordable and convenient for you.
- Direct Lenders
There is no doubt about it that direct lenders are fast becoming the most preferred alternative to traditional lenders for getting a loan. And when it comes to loans for bad credit borrowers, the terms and conditions offered by these lenders are very hard to beat.
With their simple and easy online application process, anyone can get the loan within hours. Today, the UK market is flooded with such type of borrowers. So, getting approval with low credit score is very likely to happen. The only disadvantage of getting a loan from an online lender is a high rate of interest. But that should be fine for borrowers as they are getting a loan when no one else is willing to offer them.
- A Private Lending Agency
These lending agencies functions independently of the established lenders and have very less arduous lending policies in order to gain business. They are specialized in lending for bad credit applicants and terms and conditions for bad credit borrowers are pretty good.
Also, repayments are convenient and affordable because of longer repayment duration. This lowers the share of the amount paid each month, so approval with dismal credit score is possible.
But you should notice one thing here that the interest paid will be very high due to longer repayment duration. Private lending agencies are also very open to loan restructuring.
We can conclude that getting a loan is not very difficult if one has an abysmally low credit record. With proper research, you can find a loan which will suit you. It is better to shop around over the Internet before settling for any lender. You can get a loan at a lower rate and good term and condition if you do proper research. Always keep in mind to take the only required amount. Any extra money will put you in further trouble. And always try to repay on time.