3 Best Loans for People with a Poor Credit History

Can I Turn To My Bank?

The short answer is probably no.

If your financial situation is likely to preclude you from accessing the most affordable options from your bank, you are likely to be directed towards the options available form alternative lenders providers (i.e. those who provide loans or other financial products to people who have been turned away by mainstream lenders) who specifically target borrowers with who have had prior financial difficulties.

These lenders have made a variety of different options available with some regularly grabbing the headlines.

For additional information relating to your past finance history and why they are so important, please take some time to check out this recent Investopedia article – The importance of your current rating

Option No. 1: Turning to Family & Friends

The most obvious and affordable option for many people is often one that is completely over-looked.

Turning to family or friends for help in a time of need can often provide the ideal solution to short term financial issues.

Potential embarrassment or worries about future problems are common reasons for bypassing this option but there are definite ways around this.

Offering to make interest payments on any money borrowed or signing an agreement are 2 options which can help to provide peace of mind for both parties.

Key points

• Often interest free
• No fees involved
• Reduced pressure

The Money Advice Service recently highlighted some of the pros and cons of borrowing from friends and family. To see what they had to say, please click on the following article:

Option No. 2: Guaranteed Finance

If your family or friends would like to help you but cannot or will not lend you the money personally, a guaranteed option may offer the perfect alternative.

Guaranteed loans work by offering anyone who can find someone to back their application the opportunity to apply for a loan of typically up to £10,000.

The person backing you will not be expected to make any payments unless the borrower defaults on payments.

Key points:

• Unsecured finance available from sums ranging from £50 to £10,000

• No financial background check for the borrower (the current rating of the person backing the borrower will be factored into the application)

• Interest rates vary but for amounts of £1,000 and upwards, an APR of approximately 50% is common.

Option No. 3: Doorstep Finance

Doorstep finance options are typically aimed at borrowers who wish to take out a relatively small amounts of between £100 and £500.

As implied in the name, doorstep finance works by having a designated agent of the lender coming to your home on a regular basis to collect the repayments in person.

Key points

• Unsecured short term borrowing

• Designed to cut through red tape to allow access to a sum of up to £500

• Although much cheaper than some options, doorstep loans will typically be available with APRs of between 275% and 550%