1. Get to know your credit score
Knowing your credit score and understanding how this will affect your application for credit is a crucial first step when thinking about applying for a loan.
Your credit score will directly influence the outcome of your application. If you have bad credit, your borrowing options could be limited compared to someone with a history of good credit.
If you’re worried about your credit score, you might choose to apply with a lender who specialises in loans for people with bad credit. It’s important to be aware that a bad credit loan could come with a higher rate of interest.
2. Consider improving your credit rating before you apply
If you have bad credit and your need for a loan can wait, you might wish to work on improving your credit score before you make an application. Typically, the better your credit score, the better your chances of being approved for a loan.
There are many ways to work towards a healthier credit score, starting today.
- Pay your bills and any existing credit commitments on time each month.
- Check your credit report for errors and amend any incorrect or outdated information.
- Register to vote at your current address.
- If you have a credit card, be mindful of how this could affect your credit score. Avoid using your credit card to withdraw money from a cash machine and stay well within your credit limit. If you’re trying to improve your credit score, you should also aim to keep your credit utilisation below 30%.
3. Research different types of loan
If you’re looking for a loan, it’s worth noting that there are different types to consider, including payday, short-term, and guarantor loans. You should set some time aside to research the different types to help you pinpoint which one could be a suitable fit for you.
A payday loan will typically need to be repaid in full within a month, while a short-term loan can be repaid across a choice of terms, allowing you to spread the cost of borrowing.
If you have bad credit, a guarantor loan could be something to think about. With this type of borrowing, you apply for the loan with somebody else acting as a guarantor – usually a trusted family member or friend. Your guarantor will be responsible for making your repayments if your financial situation changes and you find yourself unable to cover the cost. You can find out more about guarantor loans in our guide here. Please note that CashLady does not currently work with any guarantor loan providers.
4. Work out exactly how much you need to borrow
You should never apply to borrow more money than you need or can afford to repay.
Remember, your monthly repayments will include interest, and you should bear this in mind when deciding if a loan could be affordable for you.
5. Credit broker or direct lender?
When you apply for a loan with a direct lender, you will only be considered for their product(s). A credit broker like CashLady, however, can scan through multiple lenders and multiple products at the same time.
A credit broker uses soft search technology, which will not affect your credit score.
Whether you choose to use a credit broker or a direct lender, the most important thing is to make sure they’re authorised and regulated by the Financial Conduct Authority (FCA). You can use the FCA Firm Checker tool to make sure a broker or lender appears on the FCA register.
6. Check the eligibility criteria
You will need to make sure that you match the lender’s eligibility criteria before you make an application.
While every lender is different, to apply for a loan you’ll usually need to be over the age of 18, a UK resident, and have a UK bank account and valid debit card.
Some lenders may require three years’ worth of UK address history and a minimum income.
7. Use an eligibility checker
Some lenders allow you to check your eligibility for a product before you make a full application. This will give you an idea of how likely you are to be approved for the loan and will include a soft search, which will not have any influence on your credit score.
8. Take your time when making an application
Be sure to fill out the application as carefully as possible to avoid mistakes.
Mistakes could slow down the process in the long run.
9. Have your documents to hand
When making an application for a loan, the lender may ask you to provide certain documents, such as a form of identification, proof of address, or a recent payslip. It’s a good idea to have these to hand. This could help to make sure that the process runs smoothly and efficiently.
Could CashLady help me search for a loan?
Yes, if you meet our eligibility criteria, we’d be happy to help you search for a suitable loan.
CashLady is a credit broker, and you can use our service if you:
- Are over the age of 18.
- Are a UK resident.
- Have a UK bank account; and
- Have a regular source of income paid into your bank account.
The lenders on the CashLady panel offer short-term, personal loans between £100 and £10,000, with a range of repayment terms from 3 to 60 months. Please note that the repayment term that could be available to you will depend on the amount of money you apply to borrow.
CashLady works with several lenders who specialise in loans for people with bad credit.
What to do if you’re worried about money
Free, confidential money and debt management advice can be accessed through StepChange, MoneyHelper, Citizens Advice, and National Debtline.
Are you struggling to repay your loan? Please contact your lender. They will talk you through any options that could be available to you, and, depending on the lender, this could include reduced repayments for a set amount of time or a temporary repayment holiday.
