Tuesday, June 18, 2024

Personal loan types you can qualify for with a credit score under 560

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Any traditional lenders will not give the nod to your loan application if you have a very poor credit score. Your credit score range will be between 0 and 560 if you have missed a lot of payments and defaulted debts or if you do not have enough data to determine your credit score.

Whether your credit history is horribly bad or very little, under both circumstances, your lender will likely baulk at the idea of lending you money. If any lender signs off, very high interest rates will be charged to your account. There are various types of personal loans.

You will certainly find it slightly harder to get the nod for your loan, but it does not mean that you cannot get the loan. Personal loans are unsecured loans aiming at helping you tide over when you have an emergency. Personal loans can be used for big expenses like weddings or vacations, but since your credit file is not so appealing, you will not be able to borrow such a large amount of money. When your credit score is under 560, you are eligible to apply for only small personal loans.

The maximum amount you can borrow is up to £1,000, and the repayment length is just about a month. It depends on the lender’s policy and your repaying capacity and whether you will be allowed to pay off the debt in a lump sum or fixed instalments.

Types of personal loans you can qualify for when your credit score is under 560

Here are the types of personal loans that you can consider at the time of very poor credit scores. These loans are also known as very bad credit loans with no guarantor.

  • Instant cash loans

Instant cash loans are also known as doorstep loans, as the money can be handed to you on your doorstep. If your credit score is very poor, you are still eligible to apply for instant cash loans. These loans will help you meet your emergency expenses.

As these loans intend to meet only small unforeseen expenses, they will not let you borrow more than £1,000. Most of the lenders will cap the lending amount at £500 as you involve a very high default risk because of a poor credit rating. Some lenders could lend up to £700 as well.

It depends on your repaying capacity. You will have to pay off the debt on the due date in full. If you have opted for a doorstep loan, the representative of your lender will come to collect the full payment on the due date. However, some lenders also accept payments in instalments, but they cannot be monthly.

Since the amount is small, you will have to pay it down in weekly instalments. If you have opted for doorstep service, do not forget that you will be charged for additional service. Each time, the lender will charge you a small amount for fees when the representative visits your home to collect the instalment.

  • Bad credit loans

Bad credit loans are aimed at those who have poor credit scores. You can apply for these loans even if you have a very poor credit rating, but the loan amount will be very small. Unlike an unsecured loan for bad credit from a direct lender, you cannot get more than £2,500.

The CCJ must be satisfied when you apply for these loans. If you cleared the past dues within one month before the CCJ is issued, you can avoid it showing up on your credit file then, and chances are you will get a very bad credit loan at a lower interest rate.

If a CCJ shows up on your credit file, Make sure that it is satisfied. However, there are chances that you will get money at slightly higher interest rates even though the CCJ is satisfied. While bad credit loans can be ideal for borrowing for big unnecessary expenses, no lender will let you borrow a significant amount of money for your needs. It is always suggested that you have enough money to be able to cover your expenses because you can fund a small gap in cash with the help of a very bad credit loan.

  • Loans for the unemployed

Loans for the unemployed are also a type of personal loan that you can decide to take out when your credit rating is so bad. As the name suggests, these loans are aimed at those who are jobless. Unexpected expenses can crop up even if you are out of work.

When you do not have a job, you will live off your savings and unemployment benefits. In case you need extra funding, you can apply for loans for the unemployed using your unemployment benefits as your income. If you have a part-time job, you can use that income as well to qualify for these loans.

Unemployment loans can fund the gap in your emergency cushion only when you do not have an unsettled CCJ. Note that most lenders will not entertain your application if your credit score is under 300.

It means a very poor credit score will not come in your way of borrowing as long as your credit score is not less than 300 and you have a repaying capacity. You can opt for doorstep service as well for these loans, but keep in mind that you will end up paying heavy fees.

  • Instalment loans

Instalment loans can also come in handy when your credit score is very poor. Although these loans involve a large sum of money, you can borrow up to £3,000, provided you can repay the debt on time. The approval rate depends on your strong repaying capacity and a satisfied CCJ.

Based on your current financial situation, the repayment term will be decided, which can be up to 6 months or more. The best thing about these loans is that you can improve your credit score. When you pay each instalment over time, your lender will report those timely payments to credit bureaus. They cannot completely remove the damaging effects of previous defaults, but they can make your credit history slightly better.

The bottom line

There are various types of personal loans you can qualify for when your credit score is under 560, but it is crucial that you already have a satisfied CCJ. You can qualify for these loans only when you have a strong repaying capacity. At the time of applying for these loans, make sure you have put a gap of months since you paid off the last debt once and for all.

Otherwise, your chances of getting the nod for these loans are very bleak. Lenders will assume that you cannot manage your expenses without taking on debt, which indicates a huge risk for them. Bear in mind that these loans can be very expensive as your credit rating is very poor.






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