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So, you know what a credit score is, and that your own credit history is… less than brilliant. Indeed, the chances are that you will be very familiar with the factors that caused your credit score to be less than brilliant. Perhaps you struggled to repay a loan in the past, or you don’t have much of a history of borrowing or credit applications, so lenders can’t easily judge how likely you are to pay back any new loan on time?

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Whatever the exact situation is for you, as someone with a poor credit score, you might understandably be anxious to ensure your next credit application is a successful one.

After all, if you apply to multiple lenders, one after the other, and you are turned down for a loan following “hard” credit checks, this could have the effect of further driving down your credit score. Multiple such credit applications in a short space of time could give the impression that you are desperate for money or not managing your available funds well, which will hardly reassure prospective lenders, either. 

Before applying for any loan, we encourage you to carefully consider your financial situation and explore all available options to ensure that borrowing is the right choice for you.

So, with no further ado, here is our summary of the types of loan you could stand a stronger chance of getting approved for, even if you have bad credit:

• Secured loans

Secured loans

The term “secured loan” refers to a loan where there is a specific form of collateral involved. This can help reassure the potential lender in cases where the applicant has bad credit. 

Secured loans are typically secured against a home, so this could be something to think about if you are a homeowner. But the asset to be used as collateral for such a loan doesn’t necessarily have to be a property; some people have used their car for such purposes, for example.

While putting up your property, vehicle, or another asset as security could strengthen your chances of being granted a loan, there is the (we hope obvious) downside that the asset could be repossessed if you fail to keep up with your repayments.

So, before committing to a secured loan, you will need to think carefully about whether you could cope in a situation where you lose the asset in question. Hopefully, with responsible management of your loan, you will be able to avoid that worst-case scenario ever coming to pass.

It's important to understand that failing to meet your repayment obligations can lead to severe financial consequences, including the loss of your home. Please consider alternative options and speak to a financial advisor if you're unsure about your ability to repay.

• Guarantor loans

Guarantor loans

As the name of this type of loan indicates, it is a loan that has a guarantor attached to it. The idea is that the guarantor – who will typically be a family member or friend of the borrower – will “guarantee” that the loan is repaid in the event of the borrower not being able to make the required payments on time.

To echo what we said about secured loans above, as desperate as you will be to avoid it happening, you will need to give some thought to a situation in which your guarantor is required to step in. If this happened, could your relationship with the guarantor be seriously strained? There could also be a risk of putting your loved one into debt and worsening their own credit score.

We strongly advise discussing the full implications with your potential guarantor to ensure they are fully informed and prepared for their responsibilities.

It is worth bearing in mind, too, that while agreeing to add a guarantor to your loan application could boost your chances of getting accepted for a loan and even enable you to borrow a higher loan amount, you can still expect the interest rate to be high.

So, you will need to think very carefully about whether you will be able to afford to repay this type of loan yourself; you will want to minimise any likelihood of the guarantor needing to step in.

• Bad credit loans

Bad credit loans

While 'bad credit loans' are designed to cater to those with less-than-perfect credit histories, it's crucial to understand that interest rates may be higher, reflecting the increased risk to lenders. Always review the terms and ensure you can comfortably afford the repayments before proceeding.

Strictly speaking, there isn’t any such thing as a “bad credit loan”, at least in the sense of that term having any official status. It is simply a term that refers to loans aimed specifically at people who have a poor credit history.

However, it is true that many lenders do exist that specialise in providing loans for people who have less-than-spotless credit histories. Some of those companies feature on our own lender panel here at CashCompare, and if you decide to apply for a loan through us, we can sift through those firms to pick out a loan that is likely to make sense for you.

However, as there isn’t any specific, official definition of loans for bad credit in the UK, you will need to carefully pore over any loan offer you receive from such a lender, to make sure it definitely works for you. Some lenders may charge very high interest rates if you aren’t able to reassure them by adding a guarantor or an asset to be used as security.

Still, with our loan request form taking just a few minutes to fill in, and there not being any obligation for you to accept an offer you are presented with through our service, it could be something well worth considering if you are a bad-credit applicant on the lookout for a loan right now.

We urge all our readers to borrow responsibly. If you're experiencing financial difficulties, consider seeking advice from a debt counselling service before making any borrowing decisions. Remember, applying for multiple loans in a short period can impact your credit score negatively.

"Warning: Late repayment can cause you serious money problems. Always consider if borrowing is the right option for you and ensure you can repay your loan." For help, go to moneyhelper.org.uk.

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