Sometimes you might find yourself in need of borrowing some extra money fast due to an unpredicted expense that you just don’t have enough savings to cover. Maybe you need some extra money to invest in your business or you need fast cash to book a holiday deal to treat your family to some well-deserved time off so you can finally unwind and have that quality time together. But there’s a small challenge: your credit file might not be the best, which may make it a bit harder to get a loan. But who doesn’t like a challenge, right? After all, it’s from challenges that we grow and learn! Getting that first loan approved might make a difference and you might finally be able to prove that you’re in a position to repay your loans in full and on time, which will help rebuild your credit score little by little. But first things first, which type of loans can you apply for if you have bad credit?

What are bad credit loans?

Bad credit loans are a type of unsecured short-term loan. The maximum loan amount is usually around £1000 and you can normally apply online from the comfort of your home. If you meet certain criteria and your application is approved, the funds are typically transferred on the same day that you apply and you can choose to repay your loan in one go or in a few instalments, depending on what fits your circumstances best. It’s important to note that this type of loan is usually considered as something to help with a temporary financial shortfall and should never be seen as a long-term financial solution.

What are guarantor loans?

Guarantor loans are also a type of unsecured loans aimed at people with a bad credit history or with thin credit files, but in this case the borrower asks someone else to take responsibility for the debt if the loan becomes unaffordable for them. The guarantor can be a friend or family member, but they can’t be financially linked to the main borrower.

This type of loan application process might take a bit longer than a standard short term loan application, simply because both the borrower and the guarantor will need to fill in an application form and sometimes the lender might require some extra documentation to prove the guarantor can in fact cover the debt in the case that the borrower failed to do so.

Why should I choose a bad credit loan?

After going through what guarantor loans are, it’s no surprise that some people would prefer to avoid having to ask family or friends for financial help. The obvious reason is being able to keep your privacy, but there’s more than that. At the end of the day we are all human, and circumstances might change where you are no longer able to meet your repayments. If that were to happen, your guarantor would have to cover your debt and you might not want them to be impacted because of it.

On the other hand, bad credit loans:

  • are generally easier and faster to apply for as you’re providing only your personal information
  • allow you to borrow up to the nearest pound so you never have to borrow more than you actually need to
  • if approved, the funds get transferred to your bank account on the same day you apply
  • could help you to rebuild your credit score if you make your repayments in full and on time
  • offer you the possibility to talk to your lender and agree an affordable repayment option if you can’t afford the original repayments
  • let you decide whether you want to make your family or friends aware of your financial situation or not

We hope this information will help you make an informed decision on whether you prefer a bad credit loan or a guarantor loan in the event that you decide to take one out. However please keep in mind that these types of loans are meant to cover a temporary financial shortfall. If you think your situation is more of a long-term financial issue, we recommend getting in touch with a free debt advice company such as StepChange who will impartially advise you on what your options are. We all feel a bit overwhelmed sometimes, and there’s nothing wrong with asking for professional advice when needed.