Short-term loans and payday loans are both forms of finance that consumers think of when considering bad credit loans alternatives. However, in actuality, there is a wide range of finance types that could be considered by those with a less than perfect credit history.
In the order of most to least similar, below is an overview of some potential bad credit loans alternatives that may be suitable for you and your circumstances.
Bad credit loans alternatives: short-term loans
A short-term loan typically runs over a period of between 1 and 6 months. The amount borrowed will be in the region of payday loans, although the repayments are spread over a longer period.
Bad credit loans alternatives: payday loans
A payday loan provides funding that can be thought of as an advance. They lend a relatively small amount usually ranging between £80 and £500 that is repaid around a month later in one instalment.
Bad credit loans alternatives: line of credit loan
A line of credit loan can be thought of as a flexible loan that you can access as and when you need to, in some ways similar to an overdraft. Interest is charged as soon as the money is borrowed and the balance is repaid over a set period of time.
Guarantor loans require the borrower to have a friend or family member guarantee their loan. While they are thought of as a fast form of finance, the potential personal problems that could be caused should you default should be thoroughly considered.
Logbook loans are a secured form of finance tied to the borrower’s vehicle, and as such the amount you are eligible to borrow reflects the value of your vehicle. This is a rare form of finance that requires no credit check, however, as with all forms of secured finance, you need to carefully consider how you’d cope should you fail to keep up with repayments.
Personal loans are subject to lower interest rates than all of the other forms of finance we’ve covered so far. They can also be taken over longer periods and offer a higher upper scale as to the amount that can be borrowed. However, the acceptance conditions are far more stringent. This means that for most consumers with bad credit, they simply won’t be accessible.
Homeowner loans can provide significant amounts of funds that are secured against your home. How much you’re eligible to borrow depends on the amount of equity in your home.
There are a number of issues with this form of finance. First, only 64% of consumers are homeowners, a figure that falls to 36% for those aged 25 to 34, making this form of credit unsuitable for the many who don’t own a property. Second, securing any debt against your home whether on top of a mortgage or mortgage-free property is a risk. Miss payments or encounter difficulties in paying and your home is at risk.
A visual comparison of bad credit loans
|Type of finance||Average duration||Amount||Secured?||Credit check?|
|Guarantor loan||12 months – 5 years||£500 – £10,000||No||Yes|
|Payday loan||1 month||£80 – £500||No||Yes|
|Short-term loan||1 to 6 months||£80 – £500||No||Yes|
|Logbook loan||12 months – 5 years||£250 – £50,000||Yes – secured against your car||No|
|Personal loan||12 months – 5 years||£1,000 – £25,000||Not normally||Yes – and they’re tougher to quality for|
|Homeowner loan||5 years – 25 years||£3,000 – £250,000||Yes – secured against your home||Yes|
Should you apply with CashLady for a bad credit loan, you may also be offered:
- Payday loans
- 1-6 month short term loans
- Line of credit
- Guarantor loans
Understanding the many alternatives to bad credit loans can feel overwhelming. If you need assistance to understand your options you can contact the CashLady team using the email address below. We’re also contactable via our live chat feature, should you want to speak to someone instantly.
How does CashLady compare for bad credit loans?