There are five categories of credit score.
| 1 | Excellent | (961-999) |
| 2 | Good | (881-960) |
| 3 | Fair | (721-880) |
| 4 | Poor | (561-720) |
| 5 | Very Poor | (0-560) |
These are according to Experian, which is a prestigious credit score agency. Loans for extremely bad credit belong to the last one, which is a very poor score.
You will be amazed to know that numbers are huge in the UK of individuals with extremely poor credit scores. What will be the reasons? Well, there are many such, but the primary one is the imbalance between spending and savings.
You cannot blame inflation in the country or any other nationwide or global issues. It is your personal finance, and your decisions will matter a lot. External factors do affect your personal finance but you can do more than nothing.
It is what the UK loan marketplace teaches us: that you can have multiple borrowing options. You just have to utilise them effectively, and the results will be in your favour. Therefore, you should go for loans for extremely bad credit to save your finances urgently.
Why do you have extremely bad credit?
There can be two kinds of circumstances, due to which you have a very poor credit score.
- First, you have made mistakes of doing shopping excessively that is beyond your payment capacity;
- Second, you must have faced financial emergencies that are tough to manage and prove costly to your personal finance
You may find your situation among these, but time is to improve your finances. Availing of a loan may be like another debt, but this time, you will be on the beneficial side.
Apart from that, adverse credit scores are also the consequences of County Court Judgement (CCJ), bank defaults and bankruptcy.
Where to apply for loans for extremely bad credit?
Expecting these loans from traditional lenders like banks may not be possible. They may agree to your loan request but keep the interest rates so much higher, and the lending norms will be stricter.
In contrast, you have the option of direct lenders in the UK. These are more flexible than their conventional counterparts. It does not mean that you get extremely bad credit loans on guaranteed approval. There will be some conditions, which you need to fulfil.
For instance, you should not be under any debt while applying for these loans. Besides, your recent financial performance should be accurate, and you should be paying each payment on time. Lenders also do not want you to apply for loans from several lenders. It will have a harmful impact on your credit profile.
Therefore, you should apply for very poor credit loans from direct lenders only. Interest rates will be on the higher side, but you will have better chance of fetching instant approval.
What are the benefits of loans for extremely bad credit?
There are many benefits of very poor credit score loans, provided by direct lenders. However, you should analyse everything before signing the loan contract. It would be better to consult with your financial advisor or loan representative of your lending company.
Here are the loan benefits:-
Online mode: You do not need to go anywhere to submit the application for these loans. Instead, you will apply online with minimum paperwork. The distance to your loan is just of one-page online application form.
Soft credit check: Since these are short-term loans, online lenders do not execute hard credit checks. They tend to go for soft credit checks that will not impact the applicant’s credit record. However, you cannot expect extremely bad credit loans with no credit check.
Loans on affordability: You already have an adverse credit record, and availing of a loan with a higher amount will be one of the biggest mistakes. Instead, responsible lenders will only allow you affordable loans to obtain.
Credit score improvement: As you will get loans on affordability, you will find repaying the loan quite comfortable with your monthly income. Regular and steady loan repayments will further improve your credit scores.
Financial responsibility increases: You have taken loans previously to get extra funding for a specific purpose. This time, your motive is different. You want a loan to enhance your credit record, remove CCJ or start a positive credit score. All these things will make you more financially responsible.
What are the possible risks of loans for extremely bad credit?
These loans for adverse credit ratings are not untouched by any risks. There are plenty of them, and you cannot ignore them; otherwise, you will regret it later.
- The first and foremost risk is that you will have to pay a very high interest rate, as you are not putting any security against the loan;
- If you apply for a loan amount which is beyond your repayment capacity, then you will pay heavily for this later. It is because missing repayment will take you into a more difficult situation;
- Research of the loan marketplace should be done prior to applying for a loan. If you miss this, then you get trapped in mere advertisements of some loan companies. Choose only a reliable lender with a decent history.
What loan options come with extremely bad credit?
When you approach a direct lender to have a loan with an extremely poor credit score, one thing is for sure: you get multiple loan options. These may include:
Car loans: Yes, online lenders may offer car loans for extremely bad credit situations. It becomes possible because they accept loan applications on other aspects like the monthly income of the applicant.
CCJ loans: These are more specialised loans with ccj obtainable for people with adverse credit scores. If you get approval on it, you can have the chance to clear the judgment against your name.
Loans with no credit score: These types of loans also apply to those with no credit history. It means you can go for these funding options if you want to start a positive credit record.
In the Nutshell
There is no doubt that extremely bad credit loans are useful in multiple situations. They have varied benefits, which will help you come out of difficult financial circumstances. At the same time, you have to face significant risks as well. The main crux of our discussion is that you can go for these loans but with better preparation and sincerity in paying back. Only then can you guarantee yourself a well-balanced financial life.
Lisa Ann has developed a well-experienced professional career. From managing the staff of more than 50+ loan experts at Fastmoneyfinance to boosting the delivery of various loan offers, she has acquired many challenging roles to come out with the best results for the company. Lisa Ann is a Senior Content Author and the Chief Financial Advisor at Fastmoneyfinance. To back her massive experience in the UK’s financial industry, she has the postgraduate degree and diploma in Business and Finance.