- Emma Anderson
- January 18, 2024
If you apply to lenders who run hard credit checks, you will lose your credit points and miss out on low-interest deals. On the other hand, no loans can be signed off on without a credit check, according to the FCA. Does that mean there is no sort of thing like personal loans without a credit check?
To be honest, when you officially put in a loan application, you cannot escape hard search footprints on your credit report, and they will temporarily blow your credit points. The good news is that your credit score can be restored after making a few instalments, but it will be too quick to arrive at a decision. There are a lot of things you need to know about it.
Soft credit checks are also an option
If you are looking to take out a personal loan, it is recommended that you check your eligibility for securing a loan from a particular lender. You may find several lenders accepting applications from bad credit borrowers, but the bare minimum score varies. While some lenders will be keen on giving the green light to a 570 score, others will not entertain it if it is lower than 600. How will you get to know that you will get approval from a lender you are applying to?
You can get this information from their websites. There are chances that they do not be specific about the credit score requirement on their website. Try to get approval in advance. Pick a couple of lenders from whom you are comfortable borrowing, and then ask them to send a quote.
At this stage, they will run soft inquiries. As they do not show up on your credit report, you will not see any damaging effects on your credit score. When you put in a request for a loan, a hard credit check will be made, but you know that you will not be turned down. The securing rate is relatively high. Getting quotes from multiple lenders will not harm you as long as searches are run in the background.
Bad credit loans with guaranteed approval may involve soft credit checks
If your credit score is already bad, you will definitely get money at a higher interest rate. Hard inquiries can further take a toll on your credit score, making it more complex for you to borrow money at affordable rates down the line. Therefore, some lenders avoid running hard credit checks as long as you need money to fund emergencies.
Lenders advertise these loans as bad credit loans with guaranteed approval. Under no circumstances can it be inferred that you cannot be turned down. There are many other factors that a lender takes into account while scrutinising your application, and the prominent one is your revenue stream. A lender would like to take your repaying capacity under advisement before accepting your application. Prove that you will adhere to the payment plan without compromising on the essentials.
Since your credit score is already abysmal and your purpose of borrowing money is to fund unexpected expenditures, your lender will disburse money by running soft credit checks. The size of these loans is not more than £1,000, so you will be called to pay off the debt in a lump sum. These loans can turn out to be a nightmare if you end up with a rollover.
How to get an affordable personal loan with a bad credit score?
Now that you know, soft credit inquiries are made only when the decision in principle is to be made, but otherwise, you cannot have a lender consent to your application without hard inquiries except if you are applying for bad credit emergency loans with guaranteed approval.
You should try to improve your credit score first to enjoy lower interest rate deals, but if it is urgent, you should seek a guarantor, a third party with a good credit rating that will vouch for you in case you make a default.
However, arranging a guarantor is not a cinch as nobody would be willing to take on the risk of losing their credit points and jeopardising their finances. Therefore, you should seek other alternatives:
Apply with a co-applicant
Unsecured loans for bad credit with no guarantor can be available at lower interest rates if you apply for a loan with a co-applicant. The co-applicant can be your spouse or any other family member. You will likely get lower interest rates if you have a good credit score.
A joint loan makes sense when you are borrowing larger funds. Most of the emergency loans come with a paltry sum and they are paid off in a lump sum, so you do not necessarily have to embroil yourself into added hassle.
Take advantage of being an existing customer
If you have borrowed money from a lender before, try to apply to them. Some lenders offer lower interest rates to existing customers even if you have a bad credit rating. It is wise to maintain good relationships with your lender.
Put down security
If the borrowing sum is large, you should collateralise your loan. As your lender can repossess your assets to liquidate them to get their money back, it whittles down the lending risk, and hence lower interest rates are levied.
In order not to fall behind on payments, you should create a budget, track your spending and avoid discretionary expenses as much as possible.
The final word
You cannot get a personal loan without a hard credit check, but small emergency loans are the exception that proves the rule. Lenders can provide you with these loans by making soft inquiries that run in the background only. If you need a more significant sum, you can get a decision only based on soft inquiries, but once you submit the application form, they will check your credit score.
Emma Anderson is a financial advisor at Quickloanslender who always believes in researching hard to know her clients’ financial problems. She takes the time to understand their financial wants and needs to write the blogs on them as the solutions. In her long 14 years of experience, she has written plenty of blogs on the financial and business sectors of the UK.
Emma Anderson has been recognised for her work in financial planning and her blogs are regularly published in the website of Quickloanslender. As far as her educational qualification is concerned, she has done Masters in Accounting and Finance, and done PG Diploma in Creative Writing.