Consumers that have missed or made late payments on credit agreements during the last six years will have an adverse credit rating. This makes it virtually impossible to borrow money, to pay the mortgage or to help with bills, from mainstream lenders. It is possible to get a bad credit short-term loan, but the rate of interest reflects the risk posed to the lender. Affordable repayments are possible because the duration of the loan is only short.
Where to Get a Bad Credit Short-Term Loan
It is surprisingly easy to get a bad credit short-term loan with no credit check from a pawnbroker, Credit Union or Payday loan provider. A credit card cash advance is also a possibility, provided that an existing arrangement is in-place from before adverse credit became an issue. Whilst some short -term loans require collateral, others are completely unsecured. Only borrow money that can be paid back in-full and on-time as interest payments will quickly turn an affordable repayment into unmanageable personal debt.
Credit Card Cash Advance
Online comparison site, uSwitch.com stated that the median rate of interest on a credit card cash advance was 32%. There will also be additional administrative charges. It is cheaper to borrow money on a credit card than with a pawnbroker or Payday loan.
- Nationwide – 31.23% APR
- Lloyds TSB – 31.91% APR
- Capital One – 29.83% APR
- Nat West – 31.91% APR
- HSBC – 25.13% APR
* Figures provided by uSwitch.com
When in need of a bad credit short-term loan, taking an advance on a credit card could provide a viable solution. A consumer can normally withdraw a percentage of their credit limit from an ATM machine or write out a cheque book.
No Credit Check Payday Loans
The best known bad credit short-term loan is the Payday loan. Customers are able to borrow between £50 and £1,000 over a period of just a few days to a full calendar month. The rate of interest will be upwards of 1000%. This means that an individual who borrows money will pay £20-30 of interest on every £100.
- A cash loan of £500 for 31 days could cost almost £150 in interest, the equivalent of almost £5 per day – uSwitch.com.
Full-time employment and an active bank account are essential for approval. If opting for this type of bad credit short term loan, ensure that it is re-paid on time to prevent the accrual of further interest.
Credit Union Loans
Once membership has been established, it is possible to borrow money from a credit union. The maximum they are legally able to charge for bad credit short-term loan is 26.8% APR, although many charge far less. Loans are only available to those who can prove affordability. A local Citizens Advice Bureau (CAB) will be able to help someone find their nearest credit union.
Pawnbrokers offer bad credit short-term loans that are secured with collateral, such as gold, jewelry and electrical equipment. The majority of those borrowing money require between £50 and £300, but sums can be considerably higher. Those who borrow money will typically pay £4 to £6 of interest per month for every £100. Should a borrower default on the agreement, the collateral will be sold.
If a bad credit short-term loan is urgently required, a credit union offers the best deal. They work purely for the interests of members and will only allow someone to borrow money if monthly repayments are affordable. After a period of six years, adverse credit entries no longer show on credit reports.