How to Borrow Money with a Bad Credit Rating

Credit makes the world go around and without a source of available credit it would be incredibly hard to buy expensive items such as a car or house. Unfortunately it is difficult to borrow money when you have a bad credit rating, which can leave you in a tricky position if you need to make a big purchase. So what are your options?

Why Lenders Don’t Like You

It’s nothing personal, but lenders don’t like people with bad credit because there is a much higher chance that they will default on their loan. Before the credit crunch, lenders were falling over themselves to hand out cash to people with less than perfect credit histories. However, as we all know, this came back to bite them in a painful way, so now lending criteria is a lot tighter and unless you have a great credit history, you will find it hard to get credit from a high street lender. But don’t worry because there are a few options worth considering.

Ask a Friend or Relative

When you need money and the bank says “no”, your first port of call should be a sympathetic friend or relative. Obviously if you have burned all your bridges after failing to pay back previous loans, the answer from this quarter will be another resounding “no”, but this really is the best option if you need cash. If they say “yes” make sure you set out the repayment terms before the loan begins and decide what (if any) interest on the loan is payable. That way everyone will know where they stand and there won’t be any painful misunderstandings.

Apply for a ‘Bad Credit’ Credit Card

‘Bad credit’ credit cards do exactly what they say on the tin. They are designed for people with poor credit histories and are useful if you can repay the entire balance every month. Companies offering ‘bad credit’ credit cards charge more interest than high street lenders, so these cards can be an expensive form of borrowing. However, they are useful if you want to build up your credit rating with a view to applying for cheaper credit further down the line.

Bad Credit Loans

Bad credit loans work in much the same way as bad credit cards. The rate of interest on the loan will be higher because you are a high-risk borrower, but on the good side, monthly repayments are fixed, which makes it easier to manage your monthly finances. To minimise the interest charged on the loan, make sure you check out the offers from a range of different lenders before you apply to your preferred bad credit loans provider.

Credit Unions

Credit unions are ideal for borrowers who don’t qualify for high street lenders. They are set up by the community, for the community, and because interest rates are very low, a credit union loan is an attractive option for people living within the local community. To check whether there is a credit union in your area, perform a quick search.

If you are being held back by poor credit, take steps to rebuild your credit rating. That way you will have more choices when you need to borrow money in the future.