In the UK, money lenders use a credit score to identify who they will lend their money to and at what rate. Bad credit scoring often makes it very difficult for a person to apply for a loan.
A bad credit score usually means the lender is at risk regarding the borrower’s ability to repay the loan. Therefore, different lenders score applications differently using their own made criteria. It makes it extremely difficult to find a bank that would most likely say yes and provide a low-interest bad credit loan.
The worst thing is that there is no agreed credit score or rating amongst money lenders. While a person’s credit rating is almost always the factor in a lending decision, there are other factors that money lenders may have to consider, as well. When it comes to relatively small loans, there’s less risk involved than with a credit card or a mortgage. Also, lenders concentrating on smaller amounts may be less concerned with a poor credit rating.
As long as you can show that you can afford the loan repayments after taking into account your income and expenses, then they may still lend to you. The way lenders make money is primarily on people repaying them with interest. If lots of people don’t repay them, they lose money. Lending to people with bad credit involves a higher interest rate, partly so it keeps working for the lender financially, even if some don’t repay. The market can be divided up into various segments of bad credit loan types.
Payday personal loan – is a short-term, no credit check loan, and repaid daily. In most instances, what the borrower need is a job and a bank account. It makes it the easiest to qualify, so a person with a bad credit score can find a payday loan for a short time solution.
Logbook loans can be another form of a loan. It involves lending someone money based on the value of their car. So the borrower must have a vehicle as collateral.
Doorstep loans – this is another form of credit that involves a loan man coming to your house and evaluates you before you apply for loan.