Can you get guaranteed approval bad credit loan?

Stick man leaning on a question mark

With a poor credit rating the promise of guaranteed approval is very appealing.

In the UK this is not allowed, but the great news is that there are plenty of options.

In this article we look at the steps you need to take to find an affordable loan, even with less than perfect credit rating.


1. Very Personal Circumstances

If you look at an individual’s financial circumstances they are usually unique to that person. Lenders, therefore, are looking at a large number of variables when assessing a person’s application.

On a practical basis it would be wrong for them to approve or reject any application without properly looking at the application form. Any loan can therefore not be guaranteed, as the lender does not know your circumstances before they look at your application.


2. Changing Criteria

At any moment, many of the lenders within the bad credit loans market will be changing their loans application criteria and this will be simply to reflect their own business. This is not unusual and happens in all finance markets, whether that is insurance, banks accounts or any other financial product.

So a loan that you may have qualified for yesterday is possibly no longer available, and a loan that was not available to you yesterday maybe is today.

With such constantly changing loan criteria it is not possible to say that it’s guaranteed for you to get any loan.


3. FCA Requirements

If any lender or loan broker offers any loan with guaranteed approval this is strictly against the FCA’s code of practice.

Within the UK, financial products such as loans, bank accounts, insurance, investments etc. are regulated by the FCA (Financial Conduct Authority).

This provides protection to the consumer as there are strict guidelines the industry, lenders and brokers must operate within and if companies do not, then they can have their FCA licences revoked and in extreme cases be liable for prosecution.

There is therefore a great incentive for companies not to offer guarantees and if you see a company that does, they should be avoided.

So what options are there?

While you cannot be guaranteed a loan approval, you can do some homework you maximise your chances:

a. Get a copy of your credit rating

Before you start looking for a loan it is always worth getting a copy of your latest credit file. We think that Check My File is a good company to use as their credit report pulls in information from all the three major credit referencing agencies - Experian, Equifax and Call Credit.

If you have a number of missed payments, maybe a CCJ and have been turned down for other loans, it would then be worth looking at the bad credit options available to you.

b. Loan options with a bad credit rating

If you have a bad credit rating then unfortunately the loans that you have available to you are costlier; we summarise the different types of loan below:

Pay Day

A high cost very short term unsecured personal loan designed to last you only until you are next paid. Rates are typically very high up to about 1500%, and because of this, they are relatively easy to get and have the most relaxed acceptance criteria. Loans, however, are typically below £1,000 and we would suggest that these should be your last option.

Instalment

Also a high cost shorter term unsecured personal loan, although rather than being designed for only a few weeks, there is a monthly repayment plan as with most other types of loan. There are lenders that will lend up to £2,000. Acceptance criteria is also relatively relaxed and this is again reflected in their cost, with rates with some lenders up to about 1500% APR. There are better value instalment loans coming on the market all the time but they are still a high cost option.

Doorstep

At 272% to 399% APR, doorstep loans are much more affordable than the previous types. You will need to make weekly payments to an agent that visits your house, which some people do not like.

Guarantor

Guarantor loans are the most affordable type of loan for those with a poor credit rating, with representative APRs currently ranging from 39.9% to 54.9%. They are the most difficult to qualify for as you need to find a guarantor with a clean credit history, but as you can see they have the lowest cost.

Your next steps

We believe that a guarantor loan is the best solution for those looking for a loan who have a bad credit history, simply because they are much cheaper. So as a next step we would suggest finding out more about this type of loan, and seeing if you can find a suitable guarantor.

For more information see:

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