Loan Alternatives if You have Bad Credit Rating

Loan Application Approved Showing Credit Agreement

One of the major drawbacks when you have a poor credit rating is the high likelihood of rejection for your personal loan applications. If you have a bad credit score whether due to default or CCJ, you are already tagged a high-risk borrower either way. When you apply for a personal loan from major banks, expect to be turned down. Fortunately, there are quick and easy to avail loan alternatives for borrowers with bad credit. Among your choices include:

Logbook Loans

Logbook loans are probably the most popular options among the lot of bad credit personal loans. Not only is the loan quick to avail but it offers the largest loan amounts available. To avail loans from £500 up to £50,000, you must own a vehicle on which the loan will be secured against. Like other secured loans, however, there is a high risk involved. In case you can no longer repay the loan, your lender can repossess then sell your vehicle as dictated by the debt agreement.

Guarantor loans

If you don’t own a vehicle or any other security to offer your lender, you can always check out guarantor loans. The loan offers may not be as big as what logbook loans can offer but the loan is still accessible nonetheless. So long as you have a guarantor who is willing to back you up with your application, your loan is already good as approved. With guarantor loans, you can borrow from £1000 up to £7,500. You can borrow more up to £15,000 if you’re a homeowner.

Credit union

If you’re a credit union member, you don’t have to look elsewhere for a quick cash solution to your financial problems. With credit unions, you can borrow a small sum of money you can use for a variety for personal loans. Whether you need quick cash for car repair, rent or even groceries, your credit union should be able to lend you up to £5,000 or more at an affordable rate. The best part about credit unions, the interest rates are significantly lower than logbook and guarantor loans. You do need to be a credit union member, however, to avail this kind of loan.

Credit cards

Contrary to popular opinion, credit cards are not all that bad if you know how to use it to your advantage. If you’re in need of quick cash and you have credit cards with sufficient balance, you can withdraw cash using said credit cards. This is another form of cash advance with interest. You can withdraw as much as your credit carrier allows. Many experts consider this option more affordable than bad credit loans because the interest rates are generally cheaper with credit cards than what bad credit loan providers charge you.


Cash advance

If you’re a full-time employee and you only need a small amount of money, you can always try asking your employer for cash advance. The amount you can borrow may be limited but you’re sure that the interest rates are going to be cheap. You’ll have to repay the loan immediately, usually on your next pay check. You can do it through several installments as long as your employer agrees with the repayment arrangement.

Peer-to-Peer lending

Another type of lending that’s been gaining impressive popularity in the UK is called peer-to-peer lending. With this type of lending, the middlemen are removed from the equation hence the interest rates are lower. Rather than go to banks, you can go online and borrow directly from the lender. Loan approval is not always guaranteed but you’re sure that the loan will be cheap. To increase your chances of loan approval, make sure you can prove to your lender that you are financially capable to repay the loan even if you have a poor credit score.

Payday loans

Finally, there are the infamous payday loans, which offer loan amounts from as small as £100 up to £1,000. Advertised with the promise of quick cash, it’s no surprise why borrowers are availing the loan product from left to right. Once deemed eligible for the loan, you can get the cash on the spot, which make the loan an ideal alternative if you find yourself in a financial emergency. But there are downsides too. The loan comes with a steep interest rates and it encourages the cycle of debt.

Logbook Loans vs. Other Types of Loans

Car keys and approved loan application

When you have a poor credit score, loan application approval is less likely. Fortunately, there are now quick and easy alternatives such as logbook loans. Even with bad credit, you can apply for a logbook loan so long as you’re a vehicle owner. Then there are also other types of loans such as payday loans and guarantor loans, which do not require any security or collateral. Whichever type of loan you apply for, the best part is the no credit check requirement.

If you have a poor credit score and you’re looking for a handy and quick solution to your financial problems, here are quick comparisons of the different types of bad credit personal loans at your disposal.

Logbook Loans

Logbook loans, as mentioned above, are secured personal loans. This means a security or collateral is needed for the applicant to be eligible for the loan. Obviously, you must also be of legal age and a UK resident to avail the loan. When eligible for the loan, you can borrow from £500 up to £50,000 at repayment terms from 12 to 36 months.

Guarantor Loans

Guarantor loans, on one hand, do not require any security or collateral. You just need to meet the basic requirements plus the guarantor requirement to apply for loans from £1,000 up to £10,000 or more. The typical repayment terms for this type of loan range from 1 to 3 years. Approval for this type of loan is faster than logbook loans because there’s no security involved. You just need to make sure you have a qualified guarantor who’ll back you up with your loan application.

Doorstep Loans

If you can’t find a guarantor and you only need a small amount fast, applying for a doorstep loan rather than a logbook loan or guarantor loan makes sense. With doorstep loans, you can borrow from £50 up to £1,000. The best part about this type of loan is the fact that the lender goes to you instead of the other way around. You don’t have to leave the comforts of your home to avail the loan. You can apply, get approved and receive the cash right on your doorstep. There’s just one downside, the interest rate is pretty steep for doorstep loans.The average representative APR for the loan is typically around 1,500% or sometimes more.

Payday Loans

Another unsecured loan that promises quick cash within hours is payday loans. The loan, as its name suggests, lend you money if you have proof of your recent pay check. Loan offers usually range from £100 up to £1,000 payable within 30 days or on your next pay check. Like doorstep loans, payday loans come with steep interest rates. The representative APRs for such loans start from 1,000%, which is inclusive of your loan’s interest rate, admin fees and more.

Bottom Line

If you’re looking for a personal loan to avail but have bad credit issues, the aforementioned loans are ideal alternatives for your financial needs. Because the loans are specific for people with bad credit, the interest rates are generally higher than a standard personal loan from major banks and high street lenders.

If you’re going to pick one from the list, remember that each type of loan has its set of pros and cons. Logbook loans, for example, are for people with vehicles they can use for security while guarantor loans are for those who have a guarantor willing to co-sign the debt agreement. Either way, you just need to remember that taking out a loan should be carefully planned. And as a rule of thumb, always borrow only what you need and can afford.