According to Experian, if your credit score is 560 or below, your credit score will be considered very poor. You will more likely be refused credit cards, mortgages, auto loans and small loans, but it does not mean you cannot apply for a loan when your credit score is very poor. However, despite your very poor credit file, you will not have a wide variety of lenders offering you a loan.
As lenders will consider you a borrower with high default, they may ask you to arrange a guarantor with a good credit history to lower the risk of loaning you. Arranging a guarantor can be hard, especially in a short period. If you need money to meet unforeseen expenses, you cannot afford to wait unless you find a guarantor. As a result, you become tempted to borrow money without needing a guarantor.
Well, it is possible to get very bad credit loans with no guarantor from a direct lender, but if you are completely sure that borrowing will serve your purpose, you should fully understand repayment terms. For instance,
- Are you in a position to pay off the debt on time?
- Is there any possibility of paying off the debt early?
- What will be the consequences if you fall behind on the payment?
Before applying for very bad credit loans, you should ask yourself if you need it or if this is the right loan to serve your needs.
How to know if a very bad credit loan without a guarantor is the right option for you
Here are some vital tips you should bear in mind at the time of taking out very bad credit loans without a guarantor:
- Are you using these loans for unexpected expenses?
The most important query is if you are using very bad credit loans for unforeseen or planned expenses. For instance, if your laptop has conked out that you need to use for office work, it should have an early repair.
Since your savings are insufficient, you turn to a direct lender to borrow money. This could be ideal for taking out a loan even if your credit rating is so bad. This is because you cannot afford to have arranged money to get your laptop fixed. Otherwise, your office work will keep piling up.
However, if you use your laptop for entertainment, you can wait to get it fixed until you have a budget. It is a complete absurdity to take out these loans to meet any expenses that are not unforeseen or unexpected.
- Can you put it off?
Sometimes you may feel that you need an immediate injection of cash. For instance, your tumble dryer breaks down, and you do not have enough money to repair it. You tend to take out very bad credit loans to carry out the repair work, but technically this may not as sound as urgent.
Even if you do not get it repaired right away, you can hang your clothes dry on a clothesline. As you have got an alternative to make do unless you arrange some money, you should try to avoid borrowing money.
Very poor credit loans can be an ideal solution only if you have an emergency.
- Can you repay it on time?
Even though you need these loans for emergencies, it is important to analyse your repaying capacity. There is no point in borrowing money if you cannot repay it on time. Using an online calculator, know the estimated cost of the debt and see if your budget has wiggle room for the payment along with other regular expenses.
If you are not so sure about your repaying capacity, you should try to seek more affordable interest rates. You need to show your loan provider that you are not subject to default. You can try a joint loan with bad credit. One of the benefits of these loans is that they are not as expensive as very poor credit loans because your partner will have a decent credit score.
If you lack a co-applicant, you should try to increase your income source. You will not fall behind the due date when you have enough money to cover all of your expenses, including debt payments.
Even though you are sure about your repaying capacity, you should always get to know the ramifications of falling behind the payments. It will attract interest penalties, to say nothing of late payment fees. Your credit score will also go down, killing your few chances of borrowing money down the line.
You should have a backup plan to be able to keep up with payments despite the ups and downs in your financial situation.
The bottom line
It is possible to get a very poor credit loan without a guarantor, but these loans might be slightly expensive. At the time of borrowing these loans, you should cautiously examine your repaying competence. Ask yourself if you can actually repay the debt on time. Do you keep a backup plan in case you face another unforeseen event?
Very bad credit loans are generally recommended when you need money for urgent reasons – something you cannot put off. There should be a clear difference between needs and wants, and try to put off non-essential purchases.
Most lenders also provide financial guidelines. If you are unsure of your options, you should consult a lender for counselling. Their representatives can let you know what kind of loan options will be to your advantage when very poor credit loans cannot work for you. Though you have an option of borrowing money despite a very bad credit rating, you should try to do up your score. The higher the credit score, the better the interest rate will be.
Jessica William operates as a Senior Consultant and Chief Content Editor for 10 years at 1Onefinance. She assists the firm in getting a grip on the new lending laws and regulations. She does so by researching the trends, consumer requirements, and new audience preferences. Jessica is responsible for making important financial and administrative decisions.
Apart from helping consumers with the best solutions, Jessica Williams helps them ensure financial stability. She analyse the business data, finances, expenses, and revenue/ income of customers and determines necessary changes. Jessica finished her Doctorate in finance and law and implements her knowledge to the best interest of the firm and customers.