£2,000 Loans for Bad Credit

Updated: June 21, 2024 Author:

Quick Takeaways: The most affordable way to borrow £2,000 is with secured loans. The most expensive are instalment loans from payday lenders. The highest approval ratings with the lowest APRs are from bad credit direct lenders.

    £2,000 loans are small sums for lenders. For their customers, these are not small loans. With bad credit, interest rates hike, pushing up the cost of borrowing. These sums are quite often for emergency loans. Funds to pay a deposit on a vet bill for a beloved needing an operation, or to get the car repaired to be able to travel to work.

    They can also be used to refinance smaller loans that are accruing high interest charges, in which case, they can be used as a strategic way to lessen the interest payable on alternative credit, such as BNPL credit agreements nearing the end of a 0% interest period. Add a few of those up that are about to come into high-interest territory, it can make financial sense to take out a £2,000 loan and consolidate several smaller sums into one payment, possibly (and hopefully) at a lower interest rate. If you’re needing the £2,00 just to cover multiple minimum payments, debt consolidation loans could be a viable alternative, letting you rid yourself of sky-high charges.

    What Lenders Consider Before Approving Loans

    Lenders cannot offer guaranteed loans as they are obligated to do two things when you apply for a loan, whether that’s £2,000 or £20,000. 1) Run a credit check. A soft search can be done to avoid impacting your credit score any further. Bad credit lenders offer this service for the sole reason of preventing further harm to your credit report. 2) An affordability assessment. What to know about this is that firms are only required to conduct an assessment. Credit checks protect the lender. Affordability assessments ‘should’ protect you. There are no rules (it’s guidance for lenders to meet regulatory standards) on how much disposable income you should have left over, month by month to live on. That’s at the lenders’ discretion, and why some approve, while others won’t, despite each having the same information on your application. The more disposable income you have, the higher your chance of approval.

    Exploring the Options for Securing a £2,000 Loan

    Line of Credit Account

    Line of Credit accounts provide a revolving credit facility, much like a credit card, but it links to your bank account to be used like an overdraft. In this regard, it’s handy for those who perhaps don’t have a credit card, or an overdraft and can’t get one. If you do have those, the bad credit score is likely to hinder your ability to be approved for a credit limit increase. When that’s the case, there are lenders offering “line of credit” accounts. Polar credit as an upper limit of £2,000, whereas Drafty has an upper credit limit of £3,000. With bad credit, companies start you off on a lower credit limit, then you as you gain their trust by repaying on time, the credit limit increases. The advantage to these is that you only pay interest on the amount of credit you use.

    Store Cards and Catalogue Credit

    Should you need a £2,000 loan to buy something in cash, such as a new sofa, catalogue credit could get you the item on finance, quite often with an interest-free period, such as spreading the cost over 3, 6, or 9 months. If you can do that, great. If not, that’s when the high-cost credit comes in. The interest rates on these are high, often upwards of 59.9%. If you’ve already been down this route and now need to clear a balance nearing £2,000 to avoid those interest rates, consider secured finance.

    Secured Loans

    Secured loans are generally associated with long-term loans for larger sums. They don’t need to be. Logbook loans let you borrow between 50% and 60% of your vehicle value. Interest is high at around 250% to 400% APR repayable over 1 to 3 years. These can be secured against a car, motorbike, van, or motorhome. The logbook for the vehicle acts as security.

    Guarantor Loans

    When you can prove (with payslips and bank statements) that you have the ability to comfortably repay, then the only thing standing in the way of you and a loan approval is the bad credit score… Guarantor loans can be handy in these situations. They provide a way for you to remove the risk factor from lenders by having a friend or relative co-sign the loan agreement with you. The lender has the assurance of the loan agreement being honoured, and if not, there are two people named on the agreement. As an example of how these work to reduce risk to lenders, if the applicant lost their only source of income during the term of the loan, the creditor would then approach the co-signer to fulfil the remaining repayments.

    Calculating the Loan Affordability (And Avoiding the Dreaded Rejection)

    Your debt-to-income ratio is the amount of debt you have going out against your income. Lenders use different financial assessments to assess affordability and each has a different criteria. However, as a guideline, the three main figures you’ll want to calculate are how much your monthly rent or mortgage payment is, and all the monthly payments being made to pay down debt. If you get £2,000 per month and over 50% of that is used to pay down debts, that’s high. Half your pay is being used to pay for purchases already bought, leaving half your salary to live on.

    Whilst all lenders are generally transparent about their lending criteria, they don’t advertise how they assess affordability. If you have a high amount of debt, consider approaching a credit broker for advice before applying. They could have faced similar situations with previous customers and know of lenders willing to approve and tell you where to avoid applying because of the likelihood of rejection. If you have low debts, there’s a better chance of approval using a bad credit loan direct lender, provided that you can repay and meet all the other requirements of the lenders’ eligibility criteria.