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September 13, 2022THE PAISLEY CREATURES CULT
September 13, 2022A credit score is a reflection of a person’s financial health. Having a bad credit score is not an ideal situation for anyone. Since people with bad credit scores are considered a risk by lenders, they find it challenging to apply for a credit card or acquire a loan at competitive rates.
One can have a bad or low credit score due to all sorts of reasons. Anything can impact your credit score, from late utility payments to a high CUR.
If a person has bad credit, they might think they are ineligible for a loan or credit card. However, it’s far from true. It’s still possible to apply for credit card with bad credit or even get a loan.
Is it possible to get a credit card or loan with a bad credit score?
Yes, it is. Here is why.
Besides credit score, a lender considers other factors, like income and expense, employment status, and mortgage security, before approving credit.
However, it’s worth mentioning that not all lenders are willing to extend credit to people with a bad credit score. Thus, your options become limited.
Type of loan available for people with bad credit score
Bad credit personal loans
Many lenders offer unsecured personal loans to individuals with a bad credit score. However, these loans typically have a high interest rate. If you don’t want to apply for a payday loan or need to borrow a small amount, you can consider taking an unsecured personal loan.
Usually, lenders specialising in unsecured personal loans offer up to £25,000 for up to seven years. But your credit score can affect the loan limit or terms of repayment.
Since bad credit loans are expensive, it’s advised to check the APR to see your total cost of borrowing the money.
Secured loans
You can apply for a secured loan if you want to borrow a large sum of money. Secured loans are given against an asset a loan applicant owns, for instance, a house or car. If the borrower is unable to repay the loan, the lender can take possession of that asset.
Since lenders have the security of an asset, they don’t hesitate to extend credit to people with bad credit. Moreover, secured loans have a lower interest rate as compared to unsecured loans.
Although secured loan applications are more likely to get approved, they are riskier. One should only go for a secured loan if they are sure they can repay the full amount on time. Failing to do so means losing the asset they have put as collateral.
Guarantor loans
Besides secured and unsecured loans, individuals with poor or bad credit have the option to go for a guarantor loan. In a guarantor loan, the person named a guarantor takes up the responsibility of repaying the loan if the borrower fails to do so. The guarantor pledges their assets as security against the loan. Anyone from a family member to a friend above 21 years of age with a secure income can act as a guarantor.
When approving a guarantor loan, the lender reviews the borrower’s and the guarantor’s credit history and financial condition.
Credit builder loans
Credit builder loans are another option for people trying to rebuild their credit history.
Credit builder loans are only offered by certain providers and have stringent eligibility criteria. If you are considering applying for a credit builder loan, make sure you understand how their loan works and their eligibility criteria.
If you are eligible for a credit builder loan, the lender will typically offer you a small sum of money. However, there are restrictions as to how you use the money.
Besides loans, one can apply for credit card with bad credit. Such cards are usually called credit building cards.
Credit building cards are designed to improve a person’s credit score or build a credit history from scratch. Thus, such cards have small credit limits.
Like loan options for bad credit, credit cards for bad credit have a high interest rate. If you use such cards responsibly and make repayments on time, your credit score will go from bad to good over time.
