Our most common enquiries come from those who have a mixed credit history and wonder whether they are able to take out a loan because of their past. As brokers we do not try to target such people, but we will assist those that we feel can use loans in the correct manner. We take a look at some of the factors involved in loans for those with bad credit.
The simple fact is that the lowest interest rates on loans go to those that lenders have the greatest confidence in the loan being repaid on time as per the terms of the contract. And they will decide this by credit score. They will trust those who have dealt with debt in a professional manner in the past. If that does not apply to you, they will not lend to you. Or alternatively, they will lend to you, but with much higher interest rates. They see these rates as an insurance for themselves, should anything go wrong during the repayment period. So if you must borrow, do not expect the sort of rates you see advertised.
A key reason for my own poor credit score is my unfavourable debt to income ratio. What this means is that your level of existing debt is close or exceeds your annual income. For this reason, lenders are very reticent to lend to you, and increase your debt further. So to get the best rates on a loan, you may be better waiting and lowering existing debt first. Or more to the point, accept that you should not take on extra debt when you already have so much already.
The key to whether you should borrow is to sit down and assess a few things. The first step is to discover what loan you can get and on what terms. Then you must run the figures and decide if it is beneficial to you to take on this extra debt. Think carefully about why you need it. Decide how you can factor in the repayments into the monthly budget. And work out at the end of the repayment period if you are better off for taking out the loan. And as we do not know what the future holds, especially in the current climate, do not borrow an amount that means financially you are on the edge all the time. Only borrow what you can afford to repay comfortably. You need to insert some wiggle room for the unexpected costs in life.
By getting quotes from various lenders, your existing credit score will not be adversely affected. Only if you make a full application for a loan will a hard credit check be done. This will show up on your credit report. So you do not want to make a raft of full applications, as this suggests to potential creditors an air of desperation. However it is fine to shop around. Do not accept the first product you see. There may be better rates out there for you.
Shopping around can be a time-consuming and futile if you miss some of the best deals anyway. That is why Moolr do what we do. We collate in one handy place many of the best lenders on the UK market so that you can instantly compare the deals that are available to you. You can fill in a simple form and receive a no-obligation quote that acts as a handy guide to what lenders should offer you. You are under no duress to proceed with a loan and lenders will not pressure you or contact you with a hard sell. It is entirely in your hands. You can go away and consider your options. In fact, we always advise that you do just that!
Always remember, as we are keen to advise people, that a loan may not be your best option. You should always take your time when considering big financial decisions and determine what your options are. See if a family member or friend can help you, or you can use a credit card without attracting sky-high fees.