How do bad credit loans help with small cash needs?
Sometimes, life may not leave you with a cash buffer to counter needs. You may need one for any emergency or short-term needs. Maybe your dog fell sick and needs immediate consultation. Alternatively, the credit card bill date haunts you at the last moment.
Whatever the emergency, small loans may help. One may get it despite pending payments or loan defaults. You may call it a bad credit loan. Instead of credit scores, lenders prioritise affordability. Individuals with consistent or stable employment get instant approval.
If facing a pinch of money and lacking decent credit, a low-credit loan may help. The blog lists the best ways to settle small cash needs with one.
What does a bad credit loan imply?
A bad credit loan is an unsecured loan for individuals with credit issues. It is ideal for individuals with CCJ, Bankruptcy, loan defaults or missed payments. Qualifying for a loan with such issues is challenging. However, some loan providers consider less-than-ideal credit histories. They base the approval on aspects like- income, employment history, credit history, and income type.
The loan amount based on your current income and repayment potential. Individuals with part-time income get low amounts compared to those with regular income. One may even get a proportion of your benefit income as a loan. However, one may get it by just providing valid income proof and bank statements.
How does the loan approval have an impact of your credit score?
A credit score is a 3-digit number that leading credit agencies provide you. The popular agencies in the UK are- Experian, Equifax, and Transunion. However, most loan providers consider Experian to be the base. The lower the credit score, the lower the loan approval possibilities. Below the table will assist you analyse your loan approval chances.
| Credit Score (According to Experian) | What does it mean? |
| 0-560 | It is the lowest credit score meter. It suggests very poor credit management with pending debts, CCJ, bankruptcy or business loss. Thus, lenders may reject your application. |
| 560-720 | You may get bad credit loans. However, the interest rates and terms remain competitive. You may get a lower credit for your needs. |
| 721-880 | You have a fair credit history. It is neither too bad nor too good. You may get a loan at reasonable interest rates. However, the terms still stay inflexible or stringent. |
| 881-960 | You have a good credit score. This implies that you may get a higher amount at favourable interest rates. You may get fair rates on credit cards and mortgages. |
| 961-999 | You have an excellent credit score. Individuals with a 961-999 credit score get high loan amounts at the most affordable interest rates. You pay low monthly instalments and interest in comparison to one with a bad credit score. You are likely to get immediate approval for mortgages, car loans and credit cards. |
Ways a bad credit loan may help with small cash needs
A bad credit loan is a personal loan that helps individuals with unique cash needs. You may consider one that fits your needs and is financially affordable. Your requirements may split into either of these 3 factors. Accordingly, the respective loans may help you:
- Type 1- loans for individuals with inconsistent income
Some loans for low credit history are for individuals with irregular income. It could be due to seasonal jobs, unemployment, or the economy. Here, individuals seek instant but comfortable loans.
Comfortability means- low monthly payments and long payment duration. You can repay the equal monthly instalments for the duration. It helps you budget better and ensure the bare minimum. One such option is 12 months loan.
You can split the amount and pay comfortably. You just need to reveal that you can make consistent payments for 12 months. You may get one without detailed documentation, collateral or third-person guarantee. Check 12-month bad credit loans and no guarantor of direct lender near by. It grants one the individuality to manage payments individually. Moreover, the long repayment structure helps build a decent credit history.
- Ideal for self-employed, freelancers, part-time workers or unemployed.
- Loan payment type- monthly instalments
- Flexibility to revise repayment plan- Yes
- Type 2: Cash facility for people with small cash needs
Sometimes, you just need quick cash to fix emergencies. You may need one for cash needs for up to £3000. You may check one in situations like:
- Paying overdraft bill
- Settling utility bills before date
- Paying credit card bill
- Repairing the leaking backsplash
- Groceries
Things like these cannot wait until payday. If seeking an immediate solution, a 3000 pound loan may help. Your disposable savings should be at least £6000/month to qualify. The payment terms on short-term loans like these are more stringent than those for 12-month loans.
You may witness competitive interest rates. You can reduce the impact by ensuring regular payments. Set direct debits or payment reminders. Ensure a direct debit bank account is available before applying.
| Risks of small loans | How to avoid it |
| Missing a payment increases your interest amount. | Identify your need and borrow only what you can afford to repay. Set direct debits to avoid skipping payments. |
| Skipping payments or loan defaults affect credit score | Contact the credit provider immediately after missing the payment. Get a new payment schedule. |
| You may have a debt backlog. | Paying at least the minimum, if not the whole instalment amount. |
- Ideal for single parents, tenants, business owners, and graduates.
- Loan payment type- monthly/fortnightly/weekly instalments
- Flexibility to revise repayment plan- Yes
Type 3: Loans for one funding a big purchase or event
It is one of the most common needs for which one seeks a loan. Events like kitchen repairs, rent payments, tuition payments, etc. You may also need it to pay the insurance premium. Whatever the needs, you may need at least £10000 to fund these. However, not everyone has the flexibility to save that much monthly.
Thus, a 10000 loan for bad credit may help you. You may use it to bridge the cash need or get the lump sum. However, qualifying for the loan requires you to meet the earning criteria. The income parameter required is slightly higher than a £3000 loan. Moreover, you pay more in interest in comparison to small loans. Eventually, this increases the total repayable amount on the loan.
- Ideal for recently married, self-employed, pensioners
- Loan payment type- monthly/fortnightly/weekly instalments
- Flexibility to revise repayment plan- Yes
Bottom line
Thus, these are some ways to overcome your short-term cash emergencies. Different purposes share unique cash requirements. The blog may help you identify your loan type. However, the type may change according to your current needs and situation. Identify the situation, loan amount needs and interest rates.
Check how much you can afford to repay in instalments. You can explore the loan calculator to estimate the costs. It tells the approximate costs for the loan. Accordingly, choose the one that’s easy on budget and meets your needs.
Ailsa Adam is the Editor-in-Chief and former content head at Hugeloanlender. She has been a valuable member of the content strategy team since 2017 due to her abundant experience in the finance sector. Passionate about helping individuals navigate the world of loans and personal finance, she has dedicated herself to acquiring extensive knowledge on various financial products. Before her role at Hugeloanlender,
Ailsa worked as a seasoned journalist and writer, specialising in creating informative blogs and articles on diverse loan types. She is known for her meticulous research and commitment to delivering accurate and engaging content. She holds a degree in MBA Finance and has a keen interest in creative writing and art.
