Getting external funding for whatever purpose like paying bills or personal reasons is borrowing. It is advisable not to borrow money to fulfil luxury needs as they can wait. Besides, they are not a priority when other aspects need your financial attention.
However, you cannot borrow just when you want. Understand the significance of having the required borrowing power. Now, what is that?
It is your capability to afford repayment of the borrowed money. Therefore, it depends completely on your financial history which should depict that you are a responsible borrower. This factor matters more than even credit scores.
If you reflect on how you have handled payments in recent times, you can understand it better. Situations like poor credit indicate that there is something wrong and you must pay attention to it. Does that mean you cannot take out money now?
No, you can borrow but obviously, your options will be limited. Despite this, based on your borrowing potential, you can obtain doorstep loans for bad credit. These loans come with the additional benefit of a home credit facility.
This means you do not have to take out approved money from the bank or ATM. A loan agent will visit your home to hand over the cash. This also means that you do not have to own a bank account to receive approved funds.
For better rates and terms, you must work on improving your borrowing potential. Follow these doable steps that this blog will unfold gradually.
Enhancing the borrowing capacity – justified or not
The vitality of borrowing capacity might be a complex subject to understand. Because you might think that you can get loans regardless of low credit scores. Then, there is no reason for you to emphasise this aspect.
Lack of good scores does not restrict you from getting loans. However, this can prevent you from getting pocket-friendly rates. How? You can see for yourself in this table.
| Loan specifications | Borrowing potential of A | Borrowing potential of B |
| Loan amount | £ 5000 | £ 5000 |
| Rate of interest | 9% | 11% |
| Monthly payments | £ 63 | £ 69 |
| Interest paid over the loan term | £ 2601 | £ 3265 |
Here, person A is supposed to have favourable borrowing potential, unlike person B. It has reflected well in the rates they have received for a given amount of loan. Although the difference between their monthly payments is not significant, the overall cost is widely apart.
Thus, a person who is going through an adverse financial phase should be ready to pay the heavy price or produce other avenues of assurance. This is true when you try to get extremely bad credit loans in the UK.
No worries, as borrowing power can be repaired in the following ways.
How to amplify your borrowing potential?
Your earnings and employment are crucial while calculating this factor. Nevertheless, any form of income can help improve borrowing power. It is not necessary to have income from direct employment only.
It is altogether the way the loan provider will assess your application. In addition, it depends on the factors they want to consider. Things that can be done from your end are:
1. Keep a tab on credit scores
If you do not review your credit reports on a regular basis, you will be unaware of their status. You will have no knowledge of your poor credit scores. Since some lenders are cautious about credit history, they might reject your application.
On the contrary, regular analysis of credit reports will keep you updated about the scores. In the case of a low credit history, you can do the needful to improve it. For example, you can prioritise important payouts that remained pending for a while.
You can try to unblock funds from other expenses to meet this payment. However, you cannot do anything when you are not aware of this situation.
2. Create a stable source of income
At the end of the day, the lender will look forward to getting loan payments on time. You will be able to complete repayment if you earn well. A stable earning history can give you an upper hand.
It does not matter if you are self-employed or are doing part-time jobs. Your income should generate enough savings to help you meet the monthly payments. Achieving this is not tough as the repayment structure will be quite flexible.
Having a reliable means of income is vital and can upgrade your borrowing potential. When the loan provider makes sure that repayment is not a problem with you, they get ready to offer feasible rates. Moreover, they do not hesitate to offer better terms for repayment.
3. Weigh options cautiously
Because of an emergency, oftentimes, you do not have to waste time but go with the first option that comes your way. However, drawing comparisons between offers obtained from different lenders helps you to find the best offer.
In fact, you can search according to your borrowing capacity. With growing lending opportunities, you can approach multiple lenders. The more offers you can receive the most affordable loan rate you can get.
Besides, with direct lenders, you can take advantage of a pre-approval facility. It enables you to check rates and agree if a suitable loan rate has been offered to you. The best thing is that you do not have to go through any hard credit assessment.
Soft checks would be enough for the lender to decide what kind of rate of interest should be offered.
4. Reduce the burden of debts
If your debt-to-income ratio shows that you have more outstanding to cover, it will affect your borrowing potential. It can make the loan provider insecure about your repaying ability. This is because you have pending debts to cover.
Thus, you will not be able to allocate funds for loan payments. Receiving them from you will get delayed. You must work on downsizing the level of debts so that you can free up cash for repayment purpose.
The bottom line
Ultimately, the lender should feel confident about your financial potential. It will increase your borrowing capacity and you can think of getting loans with convenient terms and conditions.
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.
