Has your poor credit rating left you angry and frustrated, with none of the banks willing to lend to you?

In this article we explore why banks no longer lend to anyone with a poor Credit rating, and then give some sensible affordable loan options for you.

Banks protecting their interest only

It was not too long ago that banks were seemingly falling over themselves to offer new and current customers a loan.

However, thanks to a combination of bad decisions and a failure to repay outstanding debts, banks and building societies are these days far more choosy about who they are prepared to lend to because they do not want bad debts to leave a significant dent in their profits.

This new attitude from UK mainstream lenders has clearly made obtaining new customers a little more difficult and they are therefore trying harder than ever to retain their current ones. Have they crossed a line though?

Have a look at a recent Reuters article to see what you think – ‘Caring or creepy? UK banks turn to alerts to keep customers loyal‘.

How do they decide?

Credit decisions are based on the lenders wish-list of what makes a profitable customer and right at the top of this list is the applicant’s credit score.

The following article explores some of the factors which are taken into account when creating a credit score and offers advice on how to check it:

You are no longer a person – but a credit rating!

The past decade has seen a complete shift in the attitude regarding lending and mainstream lenders now focus entirely on ‘rating for risk’.

This means that every bank and building society will use your credit rating to not only dictate whether they will accept your application but also to decide which APR (Annual Percentage Rating) they are prepared to offer.

This is confirmed by Martin Lewis at MoneySavingExpert.com who offers some invaluable advice in a recent article: ‘Martin Lewis: 20 things you must know to boost your credit score‘.

So lets look at your credit rating

There can be no escape from your credit record. Your credit record contains accurate details regarding your financial history. Some of the details contained on your credit record include:

• Outstanding Debt
• CCJs (County Court Judgements)
• Missed Payments

All of which will serve as a red flag to potential lenders.

Take a moment to check out the Which? article, ‘Credit reports: All you need to know‘ to find out a little more about how they work.

The good news is that its a changing landscape with new lenders on the block

Whilst banks and building societies are still extremely cautious about whom they will lend to, the landscape is beginning to change.

It is as much about ‘will you make the lender money’ as it is about risk. This is the attitude that has been adopted by an enterprising group of ‘bad credit’ lenders who are changing the landscape of borrowing in the UK.

Still a little unsure what actually makes someone a bad credit risk? Clearscore have put some of the most common reasons that your credit score may have taken a nosedive recently in the following article ‘7 reasons why your credit score has gone down‘

So what new options are there?

If you have received the cold shoulder from your bank, there are still options for you to borrow money. However, some are better than others.

Below we have identified 2 to check out and 1 to stay away from![vc_message color=”alert-warning” style=”rounded”]

One To Avoid! – Payday Loans

The highest profile of all poor credit loans, due to a combination of prominent TV advertising and a huge amount of negative publicity, payday loans offer a short term borrowing solution but can be incredibly expensive.

Key points

• Should be viewed as a last resort
• Extremely high APRs
• Expensive charges if payments missed
• Can ultimately make financial problems worse

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Aside from the bad publicity, what do you actually know about payday loans? Take a look at this Money Advice Service article as they aim to shed a little more light on this controversial loan – ‘Payday loans – what you need to know‘

Guaranteed Loans

Guaranteed loans are a unique type or poor credit unsecured loan which requires a third party (typically a family member or close friend) to back up your loan application.

Key points

• Perfect for anyone with a poor credit rating
• Up to 10 times cheaper than payday loans
• Available for up to £10,000*
• Repayable over up to 5 years*
• No early repayment fees*
• Can be used to repair a poor credit rating

*Please note that these can vary from lender to lender[vc_message color=”alert-success” style=”rounded”]

Visit Wikipedia for a breakdown of how guaranteed loans work.

Doorstep Loans

Doorstep loans are another variation of poor unsecured loans. As the name suggests, the agreed loan will be delivered to your doorstep by one of the lender’s agents who will then visit you on a weekly basis to collect the repayments.

Key points

• Available quickly
• No credit check*
• Typically offer sums of between £100 & £500*
• Repayable over periods of up to 1 year*

*Please note that these can vary from lender to lender

Further Reading

• For more on why banks are not lending, check out the Forbes article:

Banks Are Not Lending Like They Should, And With Good Reason

• For more on credit ratings and what they actually mean, take a moment to visit the Investopedia article

Credit Rating Definitions 

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