12 Month Loans For Bad Credit

Updated: May 15, 2024 Author:

Key takeaway: You can borrow any amount on a 12-month loan with bad credit, as long as you can afford it. Contrary to what some adverts say, credit checks are unavoidable. The companies that offer no credit check loans are those that use a soft credit check so as not to damage your credit score any further. You can get the best rates and terms by going through direct lenders and credit unions, with approval subject to affordability assessments.

Twelve months seems like an ideal period to spread the repayment of a loan, even though you can decide on a longer duration if you feel you need it to bring the cost of the monthly repayments down. You can easily put that time frame into perspective and one year feels like enough time to be done with any debt. 

However,  ensure that you actually need the loan and exhaust all other options before you approach a credit institution to borrow money. You can borrow any amount you want, as long as you can repay it. The practical thing to do, if you have a poor credit rating, is to first explore no credit check loans. 

No Credit Check Loans For Bad Credit 

No credit check loans are advertised majorly to attract borrowers with bad credit because it implies that information on your credit report won’t have an impact. Truth is, these don’t really exist. To be authorised to provide finance in the UK by the Financial Conduct Authority (FCA), every lender is obligated to carry out a creditworthiness assessment, which can include a preliminary search on your credit report.

A soft check gives a top-level view of your credit files, showing lenders information they’d need to know like if you’ve been issued with a CCJ, or filed for insolvency. If they don’t see any seriously adverse entries, they may be more open to approving a guarantor loan. Lenders are also more agreeable if you have an asset to drop as collateral. Soft checks don’t lower your credit score, nor can they be seen by other lenders checking your report later. Hard checks are visible to other lenders and will incrementally lower your credit score.

When authorised lenders offer no credit check loans, it simply means that they’ll run a soft check against your credit report instead of a hard one. A soft check won’t damage your personal credit score, unlike multiple hard checks in a short period. 

12-month Guarantor Loans for Bad Credit

A guarantor loan is just like any other loan except that you need a third party to vouch for you. This person- your guarantor, will be a part of the loan agreement, having provided a guarantee to make the loan repayments if you can’t. 

For a 12-month guarantor loan, direct lenders typically lend up to £2,500 on average. Interest rates are typically high, depending on the financial standing of your guarantor. If they have an excellent credit score along with mortgage assets, you could get a fairer rate. 

Depending on the lender, the guarantor may be the one to receive the loan first. They can decide whether to give it to the borrower, or return the money to the lender within the two-week “cooling off period”. 

Should they hand the money over to you, exercise due diligence and make the repayments in a timely manner. Always inform them ahead of time if you won’t be able to meet a repayment on time. The two people named on a guarantor loan are jointly liable for keeping up repayments.  

12-Month Secured Loans For Bad Credit

This type of loan allows you to borrow any amount of money while using an asset as collateral. The loan amount you apply for requires an item of higher value to be used as security against the total cost of the loan. As an example, if you wanted to borrow £5,000, and the cost of the loan with interest came to £6,700, you’d need an item worth £6,700 to be used as security. Secured loans are typically personal loans or logbook loans for higher value sums, and low denominations like £200 loans, pawnbroker loans tend to lend up to 75% of an item’s resale value.

The interest rates are cheaper on secured loans because the lender can sell the item used as security to repay the loan and the accrued interest charges. This reduces their risk and assures them you will be serious about repayments since you won’t want to lose your asset.  In essence, approval and interest rates are subject to your affordability assessment and other factors, including the value of the asset used. 

The Best Rates and Terms for Loans over 12 Months with Bad Credit

If you’ve got minor problems like late payments, defaults, and aged CCJs on your credit history, the best entity to approach for a 12-month loan is your local credit union. Credit Unions are cooperative societies built and operated by its members. They are not profit-oriented and focus majorly on helping their members financially. 

You can easily ask the credit union if they’re likely to approve your loan. If their answer is positive, ask for their membership criteria if you aren’t a member already because credit unions don’t cater to non-members. Know that they will also run a check against your credit report and carry out affordability assessments.

If your approval chances are slim, don’t run the risk of failing a hard check – with a credit union or any other financial body. Instead, look at the eligibility criterias of direct lenders who deal specifically with people who have bad credit. They are quite helpful and you can even shop for the best rates amongst them. 

Should you still feel like securing the loan you need would be problematic, approach a credit broker for assistance. They are experienced in this field and can help in boosting your approval chances by getting your paperwork in order and your application in front of lenders most likely to be able to approve the amount you need based on your current financial circumstances.