Ending up with a poor credit rating is easier to do than you might think. A few missed payments on certain bills, or even just payments that are made late, can quickly affect your credit score adversely.
Having poor credit can be very limiting though, as anybody who has a less than stellar credit rating could tell you. One of the biggest things it affects is your ability to get a loan from your regular bank or building society.
There are lenders however who will consider you for short term loans bad credit. You do have to meet certain other criteria, but your past credit mistakes will not come back to haunt you and you should even be able to begin rebuilding your credit if you pay the loan off responsibly.
Why Would a Lender Offer Short Term Loans to Those with Bad Credit?
Lenders who will offer short-term loans with bad credit do so because they minimize their risk in several different ways.
The first is to only offer loans in small amounts. A traditional personal loan – secured or unsecured – from a high street bank usually has to be made in the amount of at least a few thousand pounds to make it “worth their while”. These private lenders though offer loans in much smaller amounts, so that the chances of people defaulting on them are decreased because the loans are smaller.
These also charge a higher rate of interest on the loans to encourage people to pay them back as soon as possible. Many of these short-term loans for bad credit are what are known as payday loans. Payday loans are designed to be very short-term loans that are taken out for a maximum of 30-50 days.
If you pay such a loan back within the agreed time frame you will still pay a fee that represents quite a high rate of interest, but it will not be too exorbitant.
These loans are also usually made only to people who can prove that they have a steady source of employment income and who will agree to have the lender charge the scheduled repayments to their bank debit card automatically on the agreed repayment days. This also minimizes the lenders risk by ensuring that a borrower does not forget to pay, or a cheque gets lost in the post.
How Do You Choose a Lender who Offers Short Term Loans for Bad Credit?
There are now a lot of lenders that offer these kinds of short-term loans. Some do run a credit check and while they may still consider you for a loan it may not be for as much as you had hoped.
On the other hand a company that does not do a credit check at all will sometimes also offer you a very small loan because they are taking a big risk (in their eyes anyway) Therefore when you are comparing lenders you should be most concerned about the terms and conditions of the loan offer than you are about whether or not a company is going to review your credit history.
Almost all lenders who offer short term loans for bad credit have a far more relaxed policy on credit scores than traditional banks do, so even if a company does check your credit they probably will still consider granting your application. What you need to be fairly sure of though is that you will be able to repay this loan as if you do not that will be another serious black mark on your credit report and other similar lenders will no longer consider you for a loan either.