Many have a low credit score and have to cope with debts. This puts stress, confusion, and at times causes missed payments, which aggravates the situation. An unsecured debt consolidation loan combines all your existing debts into one monthly payment with a clear end date.
Many specialist providers deal with borrowers with credit problems. Their requirements are not the same as those of the mainstream banks. They are more concerned with what you are going through.
You are aware of realistic ways of choice, probability of approval, and steps you can take to be pragmatic. You will also find out what lenders deem a bad credit application, what they are seeking other than credit scores, and how to maintain your rating in the search process.
Can You Actually Get Approved with Bad Credit?
Yes, you can still get approved for loans with bad credit in the UK. Many lenders today provide loans to borrowers with poor credit histories. However, you will not have as many choices as those with good credit scores.
You will get a loan amount between £1,000 and £7,500. The lenders do not consider your credit score, but they consider a lot more. They verify whether you are financially capable of making monthly payments. They do soft search applications to view your opportunities without submitting a complete application.
- Cash flow matters more than past mistakes
- Stability in income outweighs the payment intermittencies
- Old issues have less intensity in comparison to their recent behaviour
- Less capital loans entail non-complicated initial approvals
- Each repayment builds a better credit history
What Do Lenders Look at Besides Credit Score?
The monthly income is significant when it comes to lending. They also accept other types, such as full-time employment, self-employment or even certain benefits. They will scrutinise all your basic expenses such as rent, utility and food bills to determine your payments.
The amount of disposable income left after paying all necessities often determines loan approval. The lenders give preference to job seekers who have also served at least six months with the same employer.
Your years of residence at your current residence are an indication of stability. The lenders will give preference to individuals who have not changed their residence multiple times.
The amount of debt that you have is fully scrutinised in the process of application. An excessive number of loans being taken out may indicate that you have a financial burden despite paying on time.
Most borrowers have been asked by the lenders to provide the bank statements. They will also enquire about the number of credit applications you have made in the recent past.
| Credit Score Ranges by Agency | |||
| Rating | Experian (0-999) | Equifax (0-1000) | TransUnion (0-710) |
| Excellent | 961-999 | 811-1000 | 628-710 |
| Good | 881-960 | 671-810 | 604-627 |
| Fair | 721-880 | 531-670 | 566-603 |
| Poor | 561-720 | 439-530 | 551-565 |
| Very Poor | 0-560 | 0-438 | 0-550 |
Lenders That Accept Bad Credit
The bad credit lenders know that credit scores do not give all your financial data.
Specialist Bad Credit Lenders
Several unsecured debt consolidation loan providers now focus entirely on helping people with poor credit. These lenders create scoring systems that do not place as much emphasis on credit scores.
The lenders have more lenient conditions and more flexible repayment plans. This can restore credit in the long term. You can consolidate a number of debts into a single payment with a specific maturity date. This will make your finances easy. This also saves on the total interest expense.
Online Lenders
The online lenders have a tendency to be more innovative in their credit determinations. They use algorithms that take into account other data points, other than the conventional credit checks.
These lenders usually make decisions faster and provide funds within a short duration. The application is fully online and hence saves you time and hassle. Most of them offer good budgeting products in relation to their loans.
Peer-to-Peer Platforms
P2P networks link borrowers and individual investors who can lend money. These marketplaces are at times ready to accept applications which might not be accepted by conventional lenders. They usually charge competitive rates to bad credit borrowers.
P2P lending involves a more customised way of borrowing. There are numerous systems where people can make partial, early repayments without any penalty.
How to Boost Your Approval Chances?
Improving your chances of getting a loan is a process which requires some preparation. These can significantly increase your chances of getting approved, even with bad credit.
Step 1: Ask all three major credit agencies, which include Experian, Equifax and TransUnion, for a credit report. You watch out for errors such as not realising that an account is not yours, or that the payment has been identified as late. You challenge any mistakes to the credit agencies.
Step 2: Ensure that you are registered as a voter at your present address. This will authenticate your identity and address form to lenders.
Step 3: Continue to pay all your bills within the allotted time of 3-6 months prior to any new credit. Recent positive payment history carries significant weight with many lenders.
Step 4: Minimise the amount of money in your credit card accounts by keeping them to less than 30 per cent of your limit. It would be financially stressed because of high utilisation rates.
Step 5: Formal applications should be made after using soft search tools. These leave no traces but intimate your approval possibilities.
Step 6: Use the same bank account, phone number, and address.
Will Applying Hurt Your Credit Score?
Learning about the impact of applications on your credit score also protects your credit score when seeking loans. All credit checks have an imprint, although they do not all have equal effect.
Soft searches do not have an impact on your score whatsoever, and this is why they are best when doing preliminary research. With no disadvantages, these initial verifications provide fairly acceptable approval forecasts. Hard searches normally result in a slight temporary decline in your credit score.
Applying several times within a short period of time would be disastrous to your score. This same trend is perceived by lenders as an indication of a troubled financial condition.
- Soft searches remain invisible to other lenders
- Hard searches are visible for about twelve months
- Rejection increases the impact of hard searches
- Spacing applications minimise overall damage
- Pre-approval tools offer valuable insights
Alternatives If You Can’t Get Approved
There are alternatives for your situation. These options have unique features that might work better for your specific requirements.
Secured Loan
This kind of loan is secured against your property, and if you don’t repay the loan, the lender can claim your home. Since the lender is less risky, you can expect to pay a much lower interest rate than with an unsecured loan. The repayment period can be as long as 25 years.
Debt Management Plan
Debt Management Plans (DMPs) can be a solution when you are unable to make full payments on your debts. A free debt charity will act as your representative in negotiations with creditors and will arrange for lower monthly payments that are based on what you can really afford. You will make a single monthly payment to the DMP provider.
Individual Voluntary Arrangement
An IVA is a legal agreement by which the creditors agree to write off a certain amount of debt after the debtor has made affordable monthly payments over a term of about five to six years. At the conclusion of the IVA, any debt that has not yet been paid is discharged. The agreement will negatively impact your credit score, but it at least provides you with a definite end date.
Balance Transfer Card
They allow the holder to transfer balances from existing credit cards to a new one. Certain cards may offer a 0% introductory period also to those who have less than perfect credit. To maintain the offer, you will have to make at least the minimum monthly payments.
Family Loan
In this way, borrowing is done without any credit checks since the money comes from family. If necessary, you can literally set everything down on paper to avoid misunderstandings that may arise due to relationship issues. You can decide together on the repayment plans, the interest (if any), and the consequences of non-payment.
Conclusion
Before applying, you check your credit score. This streamlines your finances and also gives you a step-by-step method of getting out of debt. By providing a fixed payment, many borrowers whose loans are not ideal can easily plan the number of due dates and the amount, and can easily budget their payments.
Most importantly, borrowing should be done on what you can be in a position to repay according to your present revenues and expenditures.
