Easy Loans For Bad Credit

Updated: April 08, 2024 Author:

Key takeaways: Products labelled as easy loans for bad credit offer no guarantee of approval. They all require credit checks and an affordability assessment. Short-term Secured Loans are available from as little as £10 right up to £1,500, repayable over 6 months with interest rates from 0.13% daily on pawnbroker loans, and upwards of 99.9% on unsecured loans.

    Getting a loan when you have bad credit can be a difficult task. Banks and traditional lenders are more likely to turn people down for a personal loan if they have bad credit, which can feel like a never-ending battle. Even with bad credit though, lenders can still assist – for a price. Some are more lenient than others and that’s what’s meant by the term easy loans. They’re easier to qualify for as the loan underwriters have more forgiving terms.

    With a bad credit score, the number of loans available to you will be limited, and the amount of interest you’ll pay back on the loan will be higher for you than it would be for someone with a good credit score. Rather than randomly applying for loans with the lowest cost, applications would be better directed toward specialist lenders that focus solely on helping customers get finance, irrespective of their credit score.  

    Prior to applying for any type of finance, learn as much as you can about the loan company. Are they are a direct lender? or a credit broker. (Brokers vs Lenders). What’s the maximum repayment period? Do they offer no guarantor loans or guarantor loans only, because with a guarantor, interest rates can be lower. No guarantor loans carry a higher risk to the lender, pushing the APR (Annual Percentage Rate) higher. Some lenders will offer secured loans where you put forward an asset such as your car as collateral, whilst others will offer unsecured loans where you don’t have collateral or a guarantor. 

    You are more likely to be offered an unsecured loan once you have a better credit score. Whilst most lenders won’t reveal what the ideal score is, 650-750 is considered a good score but keep in mind bad credit lenders will work with lower numbers than this. What classes as a bad score depends on the credit reference agency:

    • Experian: 561-720
    • Equifax: 280-559
    • Transunion: 561-565

    It’s not uncommon for payday loans to have an APR of around 1,250%. Despite the Annual Percentage Rate used, the repayment terms are shorter. 1 month for payday loans, 3 to 6 months for instalment loans, and short-term unsecured loans, up to 12 months. Repaying over 1 year is considered a long-term unsecured loan. The shorter the repayment period, the higher the monthly repayments. Loans can be subject to affordability assessments, to stand the best chance of passing one, prepare a budget showcasing your monthly income and expenditure. Your disposable income should be enough to cover the repayments, without causing you more money grief.

    What Is The Easiest Type of Loan To Be Approved For?

    Secured short-term loans more commonly known as pawnbrokers loans are the easiest type of loan to get approval for. This is because the loan is secured against the value of an item that the lender keeps until you repay. If you fail to repay the loan, the lender can sell the item to recuperate their money. An affordability assessment won’t always be required as the lenders know they already have the means to get their money back if you default on the loan. 

    Typically, loans are offered up to 75% of an item’s pre-owned retail value so common items to secure a loan against usually include jewellery or electronics. These loans are normally repayable over 6 months which does offer a little more flexibility when compared to a payday loan. With a pawnbroker loan, some lenders let you borrow as little as £10, others offer up to £1,500.

    Three main lenders in the U.K. operate this way – Cash Converters, H & T, and Ramsdens. Each lender will differ slightly so some will carry out credit checks whilst others won’t but each lender will require ID verification and proof of address. 

    What Other Types Of Loan Can I Get With Bad Credit?

    While a traditional personal loan will probably be difficult to obtain with a less-than-perfect credit score, specialist lenders have several products catering specifically to those with bad credit. 

    • Payday loans
    • Guarantor loans
    • Credit card loans
    • Debt consolidation loans

    Each could be described as “easy loans” however, the reality is that getting approved is not as straightforward as it seems on the surface. There are assessments that need to be done by lenders that are a regulatory requirement, in place to prevent loans from being so easy to get that they fall into predatory lending territory. That’s when lenders are so eager to let you borrow because the interest rates are hiked so high that you’d essentially be locked in. Since 2014, the max interest you’ll pay is capped at 0.8% daily and if you miss a payment, the max fee is £15. Interest accrues though so if you only pay the minimum payment, you’ll be paying interest on the interest. Aim to repay these types of loans as soon as possible.

    The general consensus is that the lower the amount you apply for, the higher the interest rate. It’s how lenders make their profit. However, payday loans, or emergency loans as they’re also referred to as) cannot cost you more in interest and fees than the initial amount you borrow – i.e. a £200 loan can’t cost more than £400 over the term of the loan. There’s a 100% cap on the total cost of borrowing.

    If you have bad credit, the amount you can borrow starts lower. The same happens with credit builder accounts and credit cards. The credit limit starts lower, and then increases once a positive history of on-time repayments is established.

    Even though all of these loans are easy to apply for, they come with higher interest rates and fees, and usually have a short repayment term. When you have a bad credit history, it’s easy to let debt spiral. That’s why affordability assessments may be required. It’s never a good idea to borrow from Peter to pay Paul – borrowing from one lender to repay another.

    The Good and the Bad of the “Proclaimed” Easy Loans

    Taking out a loan when you have bad credit sometimes can’t be avoided and it can have its perks when used properly but like any financial product, there are some downsides.

    The Advantages:

    • Specialised lenders will have experience with borrowers with bad credit and can help find the right product for you. There’s less judgement on the lenders part and the staff are more understanding than the clerk at your bank. They deal with these situations on a daily basis.
    • When used properly, a short-term loan can help out in a financial emergency and allow you to get on with life as normal.
    • The applications for the types of loans listed above are quick and easy. Credit card loans come with the added benefit of no credit check making them accessible for most.

    The Disadvantages:

    • There is a risk your credit score will drop even lower if you can’t pay the loan back or you’re late making a payment. 
    • Given the ease and speed of applications, they attract higher interest rates. Add on bad credit, the fees go up even more.
    • They’re not ideal if you’re already struggling with debt as the high interest rate and shorter repayment term give you little time to budget. This can cause debt to spiral and ultimately lead you into a worse financial position.

    What Happens if I’m Refused A Loan?

    Using a bad credit lender doesn’t guarantee that you’ll be approved for any type of loan. It just means they are more willing to lend to those with a bad credit score than what a traditional bank would be. 

    When you apply for a loan it will show up on your credit history. Some lenders will do a soft search first to check your eligibility but if they don’t and you’re refused then the loan refusal will show on your credit files. If you try to apply with a different lender, you could see your credit score drop lower as multiple refusals for a loan can be damaging. 

    The problem is if you need money in an emergency, you don’t have much time to wait between applications. There are a few things you can do to try and ensure your loan application is accepted the first time even if you have bad credit. Choosing a lender that specialises in helping people experiencing financial exclusion from mainstream lenders will increase the chance of them approving. They’re likely to require at least a soft search credit check (also called a ‘quotation search’) first as they understand the implications of taking out a loan with bad credit. If it’s looking unlikely with a soft search that you will be approved for any loan products then it might be time to start considering some alternatives. 

    Are There Any Alternatives To An Easy Loan For Bad Credit?

    If you feel like you’ve exhausted every available avenue and still need help, there are options available to you that can get you back on track without damaging your credit score even further.

    If you have a credit card, consider a credit card loan. As you already had a credit check to take out a credit card, these loans come without credit checks or paperwork making them one of the easier loans to obtain. Just be mindful of how much you’re borrowing and how this could affect your overall credit utilisation rate as a high rate can lower your credit score.

    If you’re not needing the loan in an emergency then don’t apply for another loan straight after being refused. It can paint a negative picture and make lenders think you aren’t in control of your finances. Take some time to work on improving your credit score and pay off any existing debts. 

    If you need money in an emergency consider asking family and friends, particularly if you only need to borrow a small amount. Asking for help can be hard but a small loan from family or friends won’t impact your credit score and can ease any difficulties you may be experiencing. Just be confident that you can pay the loan back in full and swiftly to avoid any upset.