£200 Loans with Bad Credit

Updated: April 08, 2024 Author:

Quick Answer: £200 loans with bad credit are short-term small loans, repayable from 1 month as a payday loan, several months as an installment loan, or 6 months as a secured loan. Secured short-term loans, also known as pawnbroker loans, are the lowest-cost finance option because an item of higher value is used as security.

    Where (and How) to Get £200 Loans with Bad Credit

    Your credit score is only a partial view of your financial situation. Many a lender is willing to look past a bad credit score, instead, putting their focus on the entries on your credit files rather than the numbers. They’re more interested in the reasons for hardship. These are firms that specialise in helping customers with adverse credit.

    Pawnbroker Loans

    Pawnbroker loans are among the easiest loans to be approved for because the £200 will be secured against an item worth more than that. There is a National Pawnbrokers Association where you can search for your nearest branch, but there are only a few independent pawnbrokers. The three biggest chains are Ramsdens, H and T, and Cash Converters. Ramsdens accept jewellery as security, as do H & T with the addition of brand name handbags – the collectible types with a high resale value. Cash Converters accept most items of value. Mainly, electronics like game consoles.

    Pawnbroker loans can be done without a credit check, but in all cases, you will be required to provide photo ID to verify your identity as well as proof of address. Some lenders will do a soft credit check for identity verification. Hard checks for pawnbroker loans aren’t usually required because if you fail to repay, the item(s) are sold to repay the loan. These are small secured loans.

    Most pawnbrokers stipulate a loan-to-value percentage, such as 75% of the pre-owned resale value. For a £200 loan, you could expect to need the item(s) to be worth up to the value of £300 on pre-owned marketplaces. Not the price you paid. As an example, a Louis Vuitton carryall bag can cost upwards of £1,200 new, but pre-owned, the resale value may be £750 or less. The loan-to-value ratio would be 75% of £750 letting you secure a cash loan for up to £562.50. You do not need to borrow the maximum amount the lender offers.

    The Cost of Pawnbroker Loans

    The less you borrow, the higher the interest rates. Most work on a sliding scale. Take H & T as an example. Borrowing from £10 to £1,500 costs 10.49% monthly, or 0.34% daily. The representative example for a £200 loan repaid over 6 months has a total amount repayable of £325.88. The lowest interest rate is 4% monthly or 0.13% daily, but that’s for secured loans over £50,000. Unless you have a diamond ring lying around worth in the region of £750,000, the interest rate will be higher.

    Wage Advance Apps

    Unsecured loans rely on the lender being assured that you have a regular income. The FinTech industry is changing how lenders lend by using Open Banking. Cash Wave from Steadypay.co can provide up to £300 loans with bad credit, excluding the severest of negative entries. They don’t charge interest, instead opting for a subscription fee of £30 a month. They will do a credit check and don’t rule out bad credit per se. They do not accept applicants with an active IVA, CCJ, bankruptcy, or recent defaults, and if you’re working and receiving income top-ups from welfare benefits, the loan amounts will be based on your earnings from employment only, excluding benefits payments. It is a wage advance app for workers.

    A Flexible Line of Credit

    A flexible line of credit is like an overdraft with your bank, except it’s not linked to your bank. Companies such as Drafty can provide a line of credit up to £3,000, but you do not need to use that, nor should you. Interest is payable only on the credit you use. For new accounts with bad credit, it’s unlikely the credit limit will be the maximum amount. It will likely be lower and could provide the £200 loan amount you require.  The representative APR here is 96.2%. That is variable though so with a bad credit score, it could (and likely will) be higher.

    Another line of credit service that’s “coming soon” is The Abaton, but no opening date has been announced. Just that the line of credit will be up to £500 for new customers and £1,100 for existing customers. When a date is announced, it will be reflected in an update on our list of bad credit loan direct lenders.

    Can You Get a £200 Loan with a Terrible Credit Score?

    Getting a loan approved for £200 with a really low credit score is challenging. To stand the best chance of being approved, try to find out the lending criteria of every company you’re considering before you proceed to apply. When you apply for any type of loan, lenders do a quotation search first (a soft hit on your credit file that’s invisible to other lenders). Then, if they think they can help, they’ll give a quote stating it’s either “subject to status” or provide you with an “offer for a loan in principle”. This means that they may be able to provide the loan but to know, they need to run a hard credit check. This is the one that temporarily lowers your credit score further each time one is run. If they’re satisfied with your credit check, they then need to verify your income and conduct an affordability assessment. This is required by most lenders as it’s part of the responsible lending criteria set out by the FCA – the regulatory body for the finance sector.

    The Main Reasons for Small Unsecured Loans Being Rejected

    Not meeting the lenders’ eligibility criteria

    The credit score shown on your credit report is indicative only. Lenders have their own credit scorecards based on the level of risk they’re willing to take on, and for what price (the interest rate they’ll quote). The higher the risk your credit report is deemed to be, the higher the interest rate will be.

    Each lender has a pre-determined risk level they’ll take on. Some will not consider applications with active CCJs, bankruptcies, or recent defaults within the past 3 to 6 months. Others will, but perhaps only after it’s been over a certain time, such as older than 1 year.  Some are happy to lend to anyone over the age of 18, others have a minimum age requirement of 25 years. Some will lend to people on benefits, others only deal with customers with a steady employment record with the same employer for the previous six months, rejecting applications from the self-employed, or employees on zero-hour contracts with irregular income. Find out what the eligibility or qualifying criteria is and don’t think – ‘but maybe they’ll overlook it’. Loan applications are mostly automated, so you’ll more than likely be filtered out before it reaches a human reviewer.

    Unable to Pass the Affordability Assessment

    The affordability assessment is a safeguard for both borrowers and lenders. It requires evidence that you can afford the monthly repayments, without causing financial hardship. The assessment is a financial analysis of the money you have coming in regularly each month and factoring in what is paid off of that.

    If current debts indicate you’re borrowing from one lender to pay another, that’s indicative of problem debt. Lenders want to see that you can comfortably afford the monthly repayments on any loan amount without causing financial distress. Failing an affordability assessment doesn’t mean you can’t get finance. It does indicate that the product you’re applying for isn’t the best fit for your circumstances. With problem debts, or when your income is stretched beyond your means to meet living expenses, debt consolidation loans and similar options may be more applicable.