Practical tips to help you improve your credit rating and avoid expensive high interest loans
If you are looking to borrow a small amount of money over a short period of time, keep your risks down to a minimum by taking a look at our guide of the top 5 cheapest and best small loans.
Putting your trust in a payday loan is a risky and expensive proposition.
Fortunately, payday loans are not the only option for anyone looking for a small loan.
Many people shy away from extending their overdraft for fear of increased charges. However, if you are only looking to access a relatively small amount of money over a short period of time, speaking to your bank about extending your overdraft can offer an ideal solution.
Assuming that you do everything possible to ensure that you do not go over your agreed limit, you will be able to access a far cheaper alternative to a payday loan.
Warning – Avoid charges, they can be even worse than a payday loan! We cannot emphasise strongly enough that you should under no circumstances go over your agreed limit as charges can often be as much as £6/day or £35 per item!
Take a moment to check out the following article as Martin Lewis offers invaluable insight regarding why overdraft charges APRs dwarf payday loans.
Another common school of thought is that increasing credit card debt is the last thing that you should do but if you have an existing credit card with some available space, this may offer another great method of accessing short-term cash.
There are even a small number of new credit cards available to borrowers with a bad credit rating.
If you are after quick cash, these will probably not offer a suitable option. Applications can often take up to a month and even then there is no guarantee the application will be successful.
Approach with Caution – Credit card debt is one of the main contributors to debt problems in the UK and according to the Money Charity, in April 2013, the nation’s total credit card debt stood at £55.3 billion. Therefore as with all debt, you should always seek to repay credit card balances at the earliest possible opportunity.
Step Change offers some excellent advice for combating credit card debt in the following article:
These loans are often thought of as a myth but there exists a small possibility that if you are currently receiving income-based benefits (income support, pension credit or jobseeker’s allowance for example), you may be able to get an interest-free loan of up to £1,500 from your local council.
These loans are only intended for use with essential items such as rent, furniture, clothing or debt repayments. The majority of loans are available for up to 2 years with repayments being calculated on an individual basis.
How to apply: Apply at the Jobcentre or download the form on Gov.uk.
Please Note – Councils are very strict on who they offer financial assistance to. Contact your local council to find out its procedure.
For a variety of reasons (often pride or embarrassment) borrowing from family or friends is often the last option that we explore.
However, as uncomfortable as we often imagine it will be, this option can often be the best one available as it can bring borrowing costs down to almost nothing.
Disposable income and savings can be pretty thin on the ground for many people and even if family and friends would love to lend you the money, they may not be in a position to do so personally. However, some middle ground is available in the form of guaranteed loans.
Guaranteed loans are loans which require the backing of a third party (typically a family member or close friend) with a good credit rating of their own.
Because the third party will be obliged to pick up the repayments should you fail to make them, the lender is prepared to see past your credit history, so long as they have a clean credit history.
Please Note – Guaranteed loans can be up to 10 times cheaper than payday loans!
There is a distinct difference between unsecured loans (such as guaranteed loans) and secured loans. Click here to find out more.
If you’re already at your limit with overdrafts (and can’t extend) and have maxed out your credit card, then consider getting help with your debts. Don’t think a payday loan is an answer – it may make your situation worse rather than better.
We also strongly advise keeping a regular check on your credit rating. Paying a visit to Checkmyfile by clicking here will offer you a number of options to access the UK’s only multi-agency credit report.
If you have the backing of someone close, exploring the guaranteed loan options available to you could offer the perfect solution to your small loan problems.
Take a little time to work out how much you can afford to borrow and submit your details to receive a range of loan offers from the UK’s best bad credit lenders. Click here to apply.