Got a few blips in your credit history or not borrowed money before? Finding finance options can prove tricky. A low credit score indicates to lenders that you’re a bit riskier to lend to, which is why you might be seeing limited finance options and high APRs. However, just because you’ve had difficulties in the past, you may still have options. To give you a clearer idea of the alternatives that might be available to you, here are a few potential finance options for bad credit.
A credit builder card is a credit card that you can use to build up your credit score. Though they often higher APRs than other cards, they may be available to people with lower credit scores.
Using it little and often and repaying it in full each month if you’re eligible for a credit builder card, could help build up your credit score over time – improving your eligibility for loans, mortgages and credit cards in the future.
As a homeowner, you may be eligible for a homeowner loan even if you’ve a history of bad credit. Possibly, you may find you can get a more favourable rate with a homeowner loan, giving you lower monthly repayments.
A homeowner loan is a loan that’s secured against your property. It gives the lender more security, meaning you could borrow larger amounts spreading them over longer terms (even up to 30 years). However, with the loan being secured against your home, this means that your lender could repossess your home if you are unable to repay it.
Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
A guarantor loan is a loan which needs one of your friends or family members to agree to repay your debt if you become unable to pay. It’s similar to a personal loan, however it’s a finance option for bad credit as it offers an extra layer of security for the lender.
If you don’t like the idea of someone close to you being linked to your debt, you may find that repaying your existing credit each month improves your credit score, making you eligible for a personal loan that you can use to repay your existing credit as a step to becoming financially independent.
Want to know more? Take a look at this guide to guarantor loans.
Sometimes when you apply for a personal loan, you may see an option for revolving credit. Instead of having a sum of money to repay like with a personal loan, revolving credit offers you a line of credit that will be available to you again once you repay it.
How often you can access this line of credit per year depends on the lender and your credit offer. You’ll only be charged interest on what you borrow, when you borrow it – similar to a credit card. Revolving credit options can vary, so make sure you’re fully aware of how and when you’ll be charged for borrowing before you apply.
Finance options for bad credit can be a good way to help you access the finance you need and could help you improve your credit score over time. Want to see if you can give your credit score a boost before you check your finance options? Take a quick look at these 10 tips to improve your credit score