The modern world of finance is dictated by credit ratings and if you slip down the ranks and find yourself with a bad credit score, you could find it difficult to obtain credit in general. However, those with bad credit could still potentially obtain some form of credit – but what if the loan they are looking for is £2500? Is it possible to get a £2500 loan if you have bad credit? Well, the short answer is yes but it depends.
Lenders and their criteria will vary widely from one another, and it will depend on how “bad” your credit score is, along with the rest of your circumstances. Moreover, you may find you can still obtain credit but you would need to use a guarantor to do so. Our guide below explains everything about obtaining this loan amount if you have bad credit. So, if you’re looking to know more about this – read on and learn with us!
Bad Credit – Is A £2500 Loan Possible?
As we mentioned, it is still possible to obtain a £2500 loan if you have bad credit, but you will certainly find it much more difficult than if you had a good to excellent credit score. The reason for this is down to lender risk. Our credit reports are essentially indicative evidence to other prospective lenders and agencies of how responsible we are with borrowing money.
If you have a good history of borrowing through credit and paying it back – your credit score will increase. However, the reverse of this results in a bad credit score. Generally speaking, bad credit scores are down to the fact you have a poor history of credit management, and this could be down to the following reasons:
- You have defaulted on a credit agreement
- You are over your credit limit with your credit cards
- Your credit utilisation is high
- You have applied for lots of credit in a short period of time
- You have been declared bankrupt or are in a DRO, IVA or DMP
- You were a guarantor and the primary borrower has defaulted on their agreement
If any of these factors above are true, then you will find your credit score in a bad position. As a result, you will find it difficult to obtain credit because lenders view you as a risk to lend to. Think of it this way, if someone you don’t trust wanted to borrow some money from you – would you agree to lend it to them?
Especially if they had a history of failing to pay you back? Does this make it impossible for you to obtain a £2500 loan though? Not necessarily. Let’s look at some ways you could possibly obtain this loan.
Compare Lenders
Lenders and lender criteria will differ from one another, and you will find that some lenders use different credit reference agencies to get a more informed view of your creditworthiness. Indeed, each of these credit reports could paint a different picture. As a result of this, you may find some lenders are happy to lend to you.
However, if your credit score is low (regardless of which credit reference agency the lender uses), then you may also find that the interest rate on offer is incredibly high. Once again, this is down to the risk to the lender.
They need something to entice them to lend to you, and without a good credit score – this could be one way that they do this. However, if you are looking to reduce the risk to the lender even further and potentially increase the likelihood of obtaining credit – you could consider the next option.
Use A Guarantor
Guarantors can be very useful for credit applications. Lenders are typically much happier to lend to people who use guarantors on their credit application because it reduces their risk of lending. This is down to the simple fact that they have another person to seek for the outstanding debt, and guarantors are normally homeowners.
Therefore, they have a clear picture of their creditworthiness and they have a solid address, should they need to send for collection. However, if you are thinking of using a guarantor, you need to be careful. Defaulting on your credit agreement with a guarantor can affect both of your credit scores, and your guarantor will be sought after for the debt.
If the guarantor defaults too, they could find themselves liable for the entire balance and could, in very extreme circumstances, lose their home depending on the credit agreement. Guarantors also tend to be friends or family members, due to the risk of placing their names to these sorts of agreements. As a result, defaulting on your credit agreement and leaving your guarantor in trouble could ruin your relationship with them.
Improve Your Credit Score First
Perhaps the best, and arguably the most advised, way to obtain a £2500 loan is to improve your credit score first. There are many ways you can do this, but depending on your circumstances – the time it takes could vary. Let’s look at some of the steps you could take to do this.
Work Towards Clearing Your Debts
Usually, the major problem with your credit score will be in relation to your debts. While you need some form of credit debt to improve your credit score, being in overwhelming debt and being unable to manage it is going to be detrimental to your credit score.
If you have multiple debts that you can’t seem to put a dent in, consider applying for a debt consolidation loan. After a few months of utilising this responsibly, you could find your credit score flying up.
Check Your Credit Reports Are All Correct
Many people have found that they have a poor credit rating because their credit report is incorrect. Credit reference agencies need you to check their reporting though for them to make a change. If you do notice something untoward on your credit reports, you need to apply for what is known as a correction.
The credit reference agency will investigate this and should fix the problem for you as soon as possible. Check the following credit reference agencies:
- TransUnion
- Equifax
- Crediva
- Experian
You will probably find that each of these has slight differences to their reports, hence some lenders might be more likely to lend to you depending on which one they use.
Keep Up With Your Payments
Regular payments and not missing payments can significantly improve your credit score. You can check your payment history on your credit report. If you notice a mark that says you’ve missed a payment – check if this is accurate. Missed payments can play a role in your credit score for up to six years, so it’s important that you solve this problem.
Final Thoughts
It’s possible to obtain a £2500 loan with bad credit, but you’re better off improving your credit score and trying again. Basic things as shown above can significantly help to do this.