Urgent Loans For Bad Credit

Updated: March 22, 2024 Author:

    If your credit score isn’t all it could be, you might be worried that you’ll be turned down by lenders if you need an urgent loan. The good news is that getting an urgent loan if you have bad credit isn’t impossible, it just requires a little more work than obtaining credit if you have a perfect score, and your terms may not be as attractive. 

    While many lenders will refuse to extend credit to those who are viewed as having a poor credit history, there are plenty of others who recognise that even those who have had financial difficulties in the past can take responsibility for their own finances. So, if you do your research well and shop around, you’re sure to find a lender who will offer you the funds you need in an emergency. 

    What Is A Bad Credit Loan?

    First things first, let’s look more closely at what a bad credit loan actually is. It’s a form of lending that has been designed for use by individuals whose credit score or history is poor. These loans typically come with fees attached as well as a higher rate of interest since they pose a greater risk for the lender. That’s why it’s so important to consider all of the loan’s terms and conditions before you take one out, so that you can make a well-informed decision about your finances. 

    How Do I Know If My Credit Is Poor?

    If your credit score is low, you’re considered to have bad credit, and lenders will view you as a greater risk. Your credit score represents your creditworthiness, and is based on your previous credit history. So, if you’ve missed payments or paid late in the past, have a high level of debt, CCJs, or other types of financial difficulties, you’ll probably find it more challenging to take out new lines of credit. 

    If you aren’t sure of your credit status, it’s possible to review it. The three biggest credit reference agencies, TransUnion, Experian, and Equifax, allow you to view your own credit report online. Monitoring it regularly helps you to identify any issues or inaccuracies so you can take steps to rectify them. If you find your score is low, you can begin taking action to improve it by making all your payments on time and in full and reducing your outstanding debts as this is the best way to qualify for more loan products and better interest rates. 

    Unfortunately, though, while this may help you get credit in the future, it won’t be a lot of help right now, since it takes some time to improve your credit score. So, you’ll need to know more about the different kinds of loans you can take out if you have a bad credit history. 

    An Unsecured Personal Loan

    Unsecured personal loans are a well-known form of borrowing from a credit union, direct online lender, or bank. An unsecured loan requires no collateral, such as a property or car, but the interest rates are usually higher. In cases of applicants with bad credit, that interest rate will be significantly higher in most instances. Not all lenders will offer an unsecured personal loan to someone with a poor credit history, but there are a few out there in the market to choose from who specialise in this type of product.

    A Guarantor Loan

    For those with a less than perfect credit history, a guarantor loan could be an ideal solution. It requires someone to be your guarantor, often a friend or family member, who will agree to accept responsibility for settling your debt should you default on your repayments. Since the guarantor’s presence reduces the lender’s risk, you can often benefit from better interest rates and terms while also working towards improving your credit score.

    A Secured Loan

    Secured loans are backed up by collateral such as your home or your car. With this type of lending, the lender will gain possession of your collateral should you fail to repay your loan. If you urgently need a lot of money and also have an asset that you can use as a form of security for the lender, this could be a good option for you. 

    A Payday Loan

    A payday loan is a high-cost, short-term loan that will usually only be for a small sum of money. This type of borrowing is usually accessible for those with a bad credit history. 

    Usually, the term is only a month or two, and while they’re a good way to gain access rapidly to the funds you need, which is useful in an emergency situation, the high charges and interest rates make them an expensive way to borrow money. It’s very important to understand all of the terms and conditions clearly before you take out this type of product.

    What Should I Consider When Applying For Bad Credit Loans?

    Here are a few key questions to bear in mind: 

    • Do I actually need this loan? Are there any alternatives?
    • What is my credit score? 
    • How much will the loan cost me? Consider the APR, interest rate, and fees.
    • Have I compared different lenders? Consider factors like repayment terms, customer reviews, and interest rates.
    • Have I worked out how much I can afford to pay realistically every month?

    How Do I Compare Different Bad Credit Loan Products?

    Comparing different bad credit loan products involves considering the following: 

    • The interest rate – a bad credit loan will usually have a higher rate of interest, but there can still be a lot of variation between interest rates offered by bad credit specialist lenders. 
    • The APR total cost – the Annual Percentage Rate of APR includes both additional fees and the interest rate. 
    • The repayment terms – all lenders offer different repayment terms. Look at the duration of the loan as well as whether your budget and their repayment schedule align. A shorter term may come with a higher monthly payment, but you could save money in interest overall. 
    • Charges and fees – some lenders levy extra charges or fees such as those for late or missed payments, or an early settlement penalty. 
    • Time to approve the loan – if you need funds urgently, another consideration is how rapidly the lenders will process and approve your loan application. 

    When you take all of these factors into account, you’ll be in the right position to choose the right urgent bad credit lender for your needs.