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Bad Credit Payday Loans

A lot of people think they have bad credit, and can’t take out a cash loan. But direct lenders like PiggyBank can offer what are often called ‘bad credit loans’, to cover unforeseen expenses.

We understand that nobody has a perfect credit history, and more conventional bank loans aren’t an option for a lot of people. If you’re looking at bad credit loans, here are some of the facts:

What Is A Bad Credit Loan?

Bad credit loans can help people with poor credit. They can also help you to build up your credit history - by paying back early or on time, you can show you’re good with credit. If your bad credit history is due to something that happened a long time ago, it also provides a more current picture of how you handle credit.

Short term loans - which include instalment and payday loans - can be bad credit loans. Lenders like PiggyBank can lend you up to £1000, and let you make repayments weekly, fortnightly, four-weekly or monthly.

How Do You Look Into Your Credit History?

All your credit information over the last 6 years, from credit cards to loans, will be on your credit file. This will also include personal information like your full name, your current and previous addresses and your date of birth. All this information can help lenders make sure it is your credit file they are looking at, as they can match these details with the information you provide them.

There are three UK credit reference agencies that compile all this information into a report, which becomes your credit file. These agencies are CallCredit, Equifax, and Experian. Their reports might be slightly different, but the basics should all match up.

You can request to see your full credit file from any of the agencies above, though it may cost you a few pounds each. You probably won’t need to look at your full credit file unless you think you may be a victim of fraud - if this is the case, you can find more information here. Generally, you’d only need to look at your credit score to see if you are eligible for certain types of loan. You can get this for free through Noddle.

Your credit score is a rating based on your credit file, which is used to determine how good you are with credit. This score can be used for any number of things - from a new mobile phone contract to renting a property. The higher your score, the better.

You may have a low credit score if you’ve missed payments on loans or credit cards, or if you have what is referred to as a ‘thin credit file’. This means you don’t have much of a credit footprint, as you haven't taken out much credit previously. Lenders want to make sure that you have a good history of paying back credit, so if you have no credit history, they’d be taking a risk if they lent to you.

Taking out a lot of loans in a short period can also stop you from taking out credit. Lenders like PiggyBank need to make sure we are lending responsibly, and won’t lend to you if it looks like you are entering into a spiral of debt. If you think that you may need advice about this, you can contact the Citizens Advice Bureau, who will be able to discuss your financial options with you.

Why Would A Bad Credit History Hold You Back?

A bad credit history means that there are negative marks on your credit file that have given you a low credit score. You may have had trouble paying back a credit card or loan, or even fallen behind on your bills. If you were issued a County Court Judgement (CCJ), this can lower your credit score even further.

If you have bad credit, should you apply for a more conventional loan, such as through a bank, they’ll look at your credit history to see the level of risk involved in lending to you. If they think that there is a high risk that you’ll be unable to repay the credit, because you haven't been able to previously, they probably won’t lend to you.

Some lenders will also look at factors outside of your credit history when you apply for credit. Each lender has their own criteria with loan approval, though it’s important to note that creditors who offer no credit check loans may charge more in fees and interest.

At PiggyBank, if you have a bad credit history, it won’t necessarily hold you back. We do conduct credit checks, but we don’t base our decision solely on this. We’ll also look at things like your employment information and your disposable income. As things like missed repayments that happened years ago can lower your credit rating, we also try to look at more recent information on your credit file. You can find out more about our eligibility criteria here.

Why Would You Need To Take Out A Bad Credit Loan?

If you have bad credit, and are unable to take out a bank loan or credit card, you may be eligible for a bad credit loan. Short term lenders are more likely to take a risk with your application, as the amount they lend you will generally be lower. With a bank loan, you could borrow up to £50,000, whereas with a short term lender like PiggyBank, you can borrow up to £1000.

Bad credit loans, or short term loans, are for unexpected expenses. You may need to take out a loan if you receive a bill in the post that you haven’t budgeted for - these often need to be paid quickly or interest and fees may be added.

If your car breaks down and you use this to get to work, you’ll need the funds to fix it as soon as possible, and probably can’t wait until payday. In these sorts of situation, you may consider taking out a bad credit loan. These types of loan are intended for people who have an unforeseen expense but don’t have access to credit from mainstream lenders due to their poor credit history.

Who Is Eligible For Bad Credit Loans?

Most lenders will conduct credit checks when you apply for a loan, to make sure they are lending responsibly. But there are a lot of other things lenders will look at. PiggyBank do look at your credit file, but we also look at your employment situation and monthly income and expenses. You may still be eligible for a short term loan with PiggyBank even if you have bad credit.

To take out a bad credit loan, you typically need to be aged 18 or over, and in part time or full time employment. Most lenders are mostly online based, so you’d also need a valid email address. With a PiggyBank loan, we send you a mobile PIN, so you’ll need a working mobile phone too.

What Are Your Options?

Some credit card companies do offer cards to those with a poor credit history. Unlike credit cards offered by banks or supermarkets, these cards typically don’t require you to have brilliant credit, but the borrowing limit is usually lower. Because of the risk involved in lending to those with bad credit, these credit cards often charge you higher interest rates.

With a credit card, as long as you don’t exceed your spending limit and keep to the minimum monthly repayments, you can borrow the same amount again the next month. This means that it could take you years to repay the money you borrow with a credit card, and if the interest rates are higher, because you have bad credit, you could end up repaying far more than you would with a loan.

With a short term loan, you are paid out one lump sum, which you would need to repay back on your payday, or in monthly instalments. This means that the total amount you would need to repay and the duration of the loan would be clear, unlike with a credit card. The Financial Conduct Authority (FCA) have also put regulations in place that mean that short term lenders have to explicitly tell you the total amount you’ll be repaying, and the repayment dates, before you take out a loan or sign an agreement.

If you do have an emergency expense, and need to take out a short term loan, you also have the option of a payday loan or an instalment loan.

A payday loan is generally meant for smaller expenses, and you pay it back in one lump sum - usually your payday. They are shorter term - our payday loans are between 7 and 35 days. With a PiggyBank payday loan, you can borrow between £100 and £400. The interest is charged at the same rate as an instalment loan - it’s 0.8% per day of the amount you borrow. As interest is applied daily, you also have the option of paying back early, to save money on the interest that would have been applied.

If you need a little more money for your unforeseen circumstance, you can instead take out an instalment loan. With a PiggyBank instalment loan, you can borrow £150 to £1000, over 2 to 5 months, to spread the cost. If you repay an instalment early or make any early payments you can additionally save money on interest with an instalment loan.

How Do You Apply For A Bad Credit Loan?

Even if you have a poor credit history, you may still be eligible for a bad credit or short term loan. At PiggyBank, we understand that nobody has a perfect credit history, and we will look at your individual circumstances when making a loan decision.

Our application is short and simple, so you can get your loan decision as soon as possible. There are 5 steps, where we’ll ask for a few personal details, and information about your employment, income and expenditure. You’ll need to be 18 or over, be in full or part time employment and a UK citizen. We also ask that you have a valid debit card and bank account - we’ll need this information if you’re approved, so that we can pay the funds into your bank.

If you’ve had an unexpected or emergency expense recently, you can apply for an instalment or payday loan here. We’re always here to help - if you have any questions about the application, you can email us at applications@piggy-bank.co.uk.

Is There Anything Else To Consider?

It’s always a good idea to check if you are working with a direct lender, not a broker. Direct lenders like PiggyBank will transfer funds straight into your bank account, while brokers can help you find a lender. Some brokers also charge a fee for their service.

If you have bad credit, before taking out a loan you need to assess whether you really need it. You can complete a budget form online, to see whether you can afford to make repayments. If you think you may need help with your debts, you can contact companies like Step Change, who give free, impartial advice.

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