How can I borrow with bad credit?
A simple guide to borrowing with bad credit
Right, so you’re considering borrowing money, but you’re worried about having a poor credit history, so where do you start and what are your options?
Point 1 - Don’t apply like crazy
The belief that ‘if I apply to everyone, I’m bound to get accepted’ - it just doesn’t work. Making a number of applications in a short period of time will do you no favours. Instead, pause, you have options and there are deals to be had. You just need to be looking in the right places.
Point 2 - Know where you stand
Before you do anything, get to grips with your credit file. It might sound bring, but would you go to the airport without checking your passport? It’s the same thing - the file includes everything about your financial history, from where you’ve lived to whether or not you’ve paid your bills on time. Lenders will use this information, to decide whether or not to lend you their money. If you don’t know what’s in your file before you set off, the chances are you’ll probably end up going down the wrong street. So make sure it’s error free and up to date. We’ve got a bunch of guides on Choose Wisely that will help point you in the right direction.
Point 3 - Work out what you can afford
Draw up a quick household budget and work out what you can afford to pay each month. If things are looking tight, borrowing more is not the answer - instead, try and cut back on unnecessary spending, such as that morning coffee.
Point 4 - Compare your options
Poor or unlimited credit history doesn’t mean the end of your search - yes, lenders will see you as a higher risk and yes you’ll most likely be charged a higher rate than if your credit history is spotless, but that’s just the way it is - you still have plenty of options, you just need to be savvy. But what are you options?
Option 1 - Guarantor Loans
Have you ever rented a room or maybe a flat? You’ve probably been asked for a guarantor to back you up. Works the same with guarantor loans - you’ll need a friend or family member - the guarantor - to support your application. But if you’re considering borrowing money and your credit history isn’t great, a guarantor loan is an option worth considering. Guarantor loans are designed for a very specific set of circumstances and come with the obvious risks - f you can’t meet your repayments your guarantor will have to, so be sure to check this though with your guarantor before you apply. However, in return you can benefit from high acceptance rates, and a competitive APR compared with other bad credit options. You can compare all UK guarantor lenders with the Choose Wisely guarantor loans comparison table and find out more in our guides section.
Option 2 - Specialist Providers
Haven’t got a guarantor? Then there are unsecured lenders out there who will consider applicants with poor credit. In return, expect rates to be slightly higher - around 100% APR. So be sure, if you do go down this route, to pay it off as quickly as possible.
Option 3 - Credit Cards
There are a number of cards designed to a) provide an option if your credit file isn’t great and b) help you rebuild your credit file for the future. These cards usually come with a higher APR than those from the high street banks, but if you can cover the balance in full each month, you won’t pay any interest.
The Bottom Line
When borrowing with bad credit, you have options - don’t panic, you’re not alone. But no-one will lend to someone who can’t pay it back, so if you can’t afford it, don’t apply. Apart from that, know where you stand, compare your options and choose wisely.
If you are looking for a loan, the Choose Wisely Smart Search is a great place to start. It’s free, won’t impact your credit file and gives you a realistic idea of the lenders that are suitable for your circumstances. Any other questions? Visit the Choose Wisely guide to borrowing with bad credit.