Could Your Solution Be a Guarantor Loan for Bad Credit?
When you have a bad credit rating, the options for getting a loan can seem frighteningly expensive!
Identifying the most affordable poor credit loan option is essential.
We discuss the option of a guarantor loan.
The challenges of getting a loan!
We understand that if you have a poor credit rating getting a loan can be a real challenge.
Not that it’s difficult to find a company who will lend the money, but the challenge is finding a loan that has sensible and affordable interest rates.
When speaking to customers, typically we find that the loans they are most aware of are from the companies that advertise heavily on TV and in newspapers.
Unfortunately, from our experience, many of these companies also have the most expensive rates of interest which pay for this advertising!
The purpose of this article is to discuss some of the solutions for getting an affordable loan even if you do have a poor credit rating.
Loans you can get with a poor credit history
There are a number of loans that you can get with a poor credit history, we discuss these below:
1. Pay Day Loans
A payday loan is simply a very short-term loan designed to last you only till next payday, and by its nature, it is therefore not really designed to be held onto for more than 30 days. Loan sizes now are typically from £50 to £500, and interest rates can be as high as 1,575% APR.
This type of loan has received a great deal of bad press due to the very high-interest rates and sharp practices of a few lenders.
On the 1st December 2015 the FCA introduced price cap rules for all payday lenders, so while this borrowing option is still not cheap, it is much more affordable than it was beforehand.
If you do not have a guarantor and only need money for fewer than four weeks, this is an option which can be a solution.
The danger is if you have the loans for longer than a month, as that is when the high-interest rates can really cause the costs to escalate.
2. Instalment Loans
An instalment loan is a small loan that is taken over a longer period than a payday loan, therefore potentially making more affordable monthly payments (if you need the loan for longer).
Loans typically range from £50 to £1000, and they can be held from one week to up to two years depending on the lender.
Instalment loans can also have high-interest rates, with rates going up to 1,255% APR, so you need to make sure that you do your sums before taking out this type of loan – that you can afford it!
The advantage of this type of loan is that you do not need a guarantor, but they are expensive!
3. Doorstep Loans
The doorstep loan has been around for a long time and is a small loan with weekly loan repayments made in person to an agent who visits your property to collect the money.
For some this is convenient but others do not like people coming to their house.
Loans range from £100 to £1500 with repayment terms of three to 12 months. Their interest rates are generally lower than payday or instalment loans, typically 272% to 400% APR.
4. Guarantor Loans
This type of loan is the most affordable type of bad credit loan currently available.
Though to qualify you need to have someone with a clean credit history to be your guarantor.
The result of this is a much larger range of loans and much more affordable interest rates. Loan amounts range from £100 to £15,000, with interest rates from about 39.9% – 54.9% representative APR’s (small guarantor loans of £100 to £500 can be up to 302%).
Is your solution a guarantor loan?
The solution for you will very much depend on your own personal circumstances:
- How much you need to borrow?
- How long for?
- What payments you can afford?
- Can you get a guarantor?
For a related Wikipedia article on what your credit history is, see: https://en.wikipedia.org/wiki/Credit_history
For more information see:
Use the loan calculator below to estimate monthly loan repayments.