allthelenders offers a simple way to compare loans in the UK, whether you are looking to borrow £200, £500 or more. We work with a number of companies that offer payday loans with bad credit too – and whilst not every lender is willing to offer loans for poor credit, there are some who will make exceptions and consider other factors such as regular income, employment and residential status.
You can use our Eligibility Test to find lenders that may accept you – it’s a unique tool that matches your answers to lender’s answers, there’s no credit search involved and it may give you the results that you are looking for.
Our website is completely free to use and you can choose exactly which lender you want to apply with. Once you have narrowed down your results, you can continue by clicking through to the lender’s website directly and completing an application. This means that your information is safe and held with that lender only and not passed onto number companies.
Payday loans for bad credit – how it works
Payday lenders are like normal finance providers, they want to lend out money and ensure that is can be repaid. Following the introduction of stricter regulation in the payday loans industry, there are specific guidelines to ensure that customers are able to repay their loans without falling into financial difficulty.
Hence, when reviewing a customer’s application, they may be cautious when lending to people with a history of defaults, arrears, CCJs and more. Similarly, customers who have multiple loans open at the same time are potentially at risk of falling into a debt cycle and being in a worse position when they started.
There are still a number of payday bad credit lenders who will take a view on less than perfect credit scores. Other factors are very important such as outstanding debts, number of arrears, your residential status (homeowners are preferred), age, income and more.
How can lenders provide payday loans for those with bad credit?
Like credit cards, loan providers will adjust the terms of their agreements to accommodate those with poor credit. To manage the risk of a potential default, lenders may restrict the amount that the customer wishes to borrow, thereby preventing the customer from over-borrowing and falling into debt.
The rate charged by the lender may also be adjusted to make up for the potential risk. So customers looking for payday loans for bad credit may find that the interest rate quoted is above the average representative APR charged. Still, the FCA price cap forbids the daily interest rate for a payday loan from being higher than 0.8% per day, so customers can have peace of mind that the rate charged is not too high.
Customers may also have potentially longer to repay their loans, giving them the flexibility to pay their debts over several weeks and months and allowing them to get back on their feet.
How to improve your credit rating
If you are serious about applying and want to improve your chances of approval for a payday loan for bad credit, there are a number of basic things that you can do to better your credit score.
Join the electoral roll: By being on the UK’s electoral roll, you are able to confirm your name and address with the local council. This information is available to credit reference agencies and UK lenders will run credit checks on you and consider this when reviewing your application. By having your name and address confirmed by the authorities, it adds more credibility to your future applications because you are someone with an actual name and residence, rather than someone who is constantly on the move or likely to go AWOL.
Close any unused cards: Payday loan companies will review how many open credit cards and loans you have when they look at your credit file. Although you may not be using your different credit cards every day, it shows that you could potentially have access to thousands of pounds if you ever needed it. This potentially adds risk to your application since lenders consider that you might be able to use this credit at any point and run into debt. The best thing to do is to close any credit cards that you are not using, including store cards. It can also be worth paying off any credit cards in full and closing the accounts sooner rather than later.
Disassociate from someone with bad credit: If you have any joint accounts with your partners, spouses or siblings and they have a bad credit score, it can negatively affect your application for a loan. This is because it is assumed that the loan you are applying for could be for the other person or you may have to help them when they face financial difficulty. If this is the case, it is worth removing yourself from joint accounts, loans or mortgages with another person and going solo.
Avoid multiple searches: If you are making numerous applications for payday loans in a short space of time, some lenders will consider this a warning sign that the individual is desperate for funds. It is normal to have around 12 credit searches per year but any more or in a short time period should be avoided.
For this reason, allthelenders is pleased to have a comparison engine which allows you to click through the lender and enable you to apply one-by-one. Other brokers in the industry offer a way to apply through multiple lenders at a time, but this can accumulate several search footprints in the process.
Are there alternatives to payday loans for bad credit?
If you find that the options provided by all the lenders are not sufficient, there are other alternatives for payday loans available. One of the simplest things you can do is ask a family member or friend to borrow money. This will allow you to avoid any traditional credit checks and they are likely to lend to you based on trust and your loan could be interest-free.
Other options including looking for someone to be your guarantor for a loan product. If you can find a person with a good credit rating to provide a backup to your loan agreement, it can add more security to your application and help you access the funds you need. Other popular options include applying through a credit union which offers very low rates if you are part of the local community.
For any other questions relating to payday loans bad credit, please contact all the lenders for more information.