If you need a long term loan but have got a less than perfect credit rating, you might find it more difficult to get finance. Missed or late payments in the past, CCJs, IVAs and bankruptcy will all impact on your credit rating to varying degrees meaning that it won't be as easy to borrow money.
There's no need to give up on the idea completely as it can be possible to get a cash loan long term even with a bad credit rating. However, there are a few top tips which can help to make the process easier, or even increase your chances of acceptance. Here's more information about how to get a long term loan with a bad credit rating.
Choose your lender carefully
If you've got an immaculate credit rating you'll have the opportunity to pick from the cream of the crop, with every lender vying for your business. There's a huge market of lenders offering a long term loan online; check out our guide of what to look for in a lender to find the one that's right for you.
For applicants who have a bad credit history, there's not such a large number of lenders who will be willing to offer a loan. It's therefore important to apply to one which is the most likely to accept you, and provide the most competitive terms. If you know that your credit history isn't ideal, don't apply to lenders who are the cheapest. These types of rates are only offered to those with a good credit history.
If you apply to a lender and are turned down, it won't just be a waste of your time but it could harm your credit rating further, worsening your chances of getting cash loans long term. Instead, look out for firms who advertise loans where there's a history of bad credit; you're far more likely to get accepted. Even these lenders come in different shapes and sizes; some are better for applicants with only minimally impaired credit ratings while others are willing to consider individuals who have had serious financial problems in the past. A look on their website should give you an idea about the qualifying criteria they use.
Improve your rating
If you've got a history of missed or late payments, or more serious debt problems, you'll need to use every possible advantage to improve your credit rating. Although you can't suddenly conjure up an immaculate financial history, there's other factors which can improve your credit rating.
You can request a copy of your credit file online, using a service such as https://www.creditreport.co.uk. This may seem like an unnecessary hassle but it's a good idea to check that your file is accurate and up to date. If there's debts showing as outstanding which have since been settled, or there's missing information you could be penalised unfairly. It's not difficult to get your credit record amended and this could help you to get a long term loan more easily, and also mean more competitive rates too.
Making sure you're registered on the electoral roll is another easy way to score points. Being registered shows that you have a fixed and permanent abode which gives lenders reassurance that you aren't about to disappear.
Time it well
If you know that you might need a long term loan in the future then you could try to repair your credit rating in the short-term.
A short term loan vs a long term loan could be easier to obtain, and even if you have to pay high interest rates you won't be paying quite as much overall. You could also consider a bad credit history credit card; there are some on the market which are marketed to individuals who need to repair their rating. If you can wait a while to get a long term loan by taking out some short term credit in the meantime, you could add some valuable points to your score by making repayments on time and in full.
Another aspect to consider is your employment history; stability is something which is important to lenders and when coupled with a spotty credit history, it could cause serious concern. If you're considering moving jobs, waiting until after you've secured your loan will help to prevent any more points being knocked off your rating.
Lenders want to know that they'll get their money back in the end and if you have a bad credit rating, they'll be worried that you won't repay the debt. This is the reason why you'll have to pay so much interest on a loan if you've had financial problems in the past.
One way to get round this is to consider a secured loan. Not everyone will qualify for this type of borrowing as you'll need to have sufficient collateral to put forward. This could be a house or a car for example. Lenders are often more willing to offer secured loans because if there's a default, they have a way of recouping the money.
However, secured loans come with an element of risk because if you can't afford to repay the loan you could end up losing the item you put forward as security, such as your house or car. If you're not familiar with the different types of loan and the financial lingo often used, take a look at our guide to the frequently used jargon.
Long term repayment loans for all
If you have a bad credit rating you could still get approved for a long term loan but you might have to pay a bit more for the privilege. Making sure you only apply to one lender, and maximising your credit rating in advance will certainly help, and you might want to consider offering some security too. As well as providing you with the cash boost that you need, a long term loan could also help your credit rating if you repay it on time but if you default, it could make things much worse and mean you can't access any borrowing at all in the future. Therefore, before you take out a loan make sure you can afford the repayments for the entire term.
In the world of finance, understanding all the financial jargon can be difficult. Click this link to read our article Cutting through financial jargon, or maybe check out the pro's and con's of taking out a long term loan