Those seeking a loan know that lenders review their past credit history. Many lenders decide whether or not to approve you for a loan by checking your credit score, but may also consider your income and other factors as well. Not all lenders are willing to provide loans to borrowers with poor credit. Lenders willing to do so are likely to charge high interest rates to account for the risk that they are taking.

Response Funding Limited is a lender in the U.K. that offers short-term personal loans. Our loan products may be available to those with less-than-perfect credit.

Consumer Borrowing in the U.K. Peaks in 2018

Why do so many people have bad credit? One reason is that households are borrowing more. In 2018, households in the U.K. reached a debt milestone of an average of £15,385. The Trades Union Congress (TUC) reported in the third quarter of 2018 households amassed a total of £428 billion in debt. This is an increase of approximately £886 per household compared to 2017 reports. These numbers include most debts with the exception of mortgages.

The amount of unsecured debt is at its highest level since before the 2008 financial crisis. This includes debt such as utility bills, personal loans, and credit cards. So far in 2019, household borrowing has significantly declined to modest levels.

Potential Causes of Bad Credit

There is a clear disparity between the amount consumers are borrowing and what they are earning. Many fear that a “bubble” of consumer debt may burst soon. Consumer debt has been increasing by 10% each year, but earnings are only averaging a 3% increase. This pattern of borrowing is leading to more debt and an increase in missed payments and defaults.

Those with poor credit must then borrow money for unexpected expenses at higher interest rates. This is a trend that is largely deemed as “unsustainable”. Many leaders feel that unions need to better negotiate pay increases. Others say that increasing the minimum wage may help to reverse excessive borrowing.

Increased Willingness to Borrow

The Office of National Statistics explains that households in the U.K. are borrowing heavily and not saving money. Last year, households borrowed £80 billion while only £37 billion was deposited into banks. During the 1990s, for every £1,000 of income after taxes, there was about £120 remaining. This ratio fell to the lowest point in 2017 at approximately £41. It seems that consumers no longer properly establish long-term savings and invest only in their homes.

What is Considered “Bad” Credit?

How do you know if your credit is considered poor? Those with poor credit find it difficult to borrow. Lenders use different criteria when evaluating your credit history. There is no definite credit score that divides good credit from bad credit. There are three primary agencies in the U.K. that compile consumer credit data. Equifax, Experian, and Callcredit are the largest and they each use different credit scales.

Credit Reporting AgenciesScoring Range
Equifax0 – 700
Experian0 – 999
Callcredit0 – 5

Estimated Credit Categories (Ranges) Using Experian

  • Excellent (961-999): Consumers in this range likely have an established credit history. They are likely to qualify for the lowest interest rates that lenders reserve for those with extraordinarily good credit.
  • Good: (881-960): Those with scores in this range are likely to qualify for the majority of loan options. Consumers should qualify for good interest rates assuming they do not have excessive debt for their level of income.
  • Fair (721-880): In this range, consumers can expect average interest rates from lenders. They generally will not qualify for the lowest rates. Some of these people may have a very limited history of credit usage.
  • Poor (561-720):  Consumers in this category are likely to have had prior credit problems. They will pay among the highest rates of interest when borrowing.
  • Very Poor (0-560):  Many in this segment have had some major credit problems. These problems may include bankruptcy or a foreclosure in recent years. It is unlikely that they will qualify for lending options offered by traditional banks.

Using a Guarantor for a Loan with Bad Credit

A guarantor is typically a friend or relative that is willing to assist a borrower with obtaining a loan. This allows borrowers to qualify for a loan that they otherwise would not qualify for. This “co-signer” is someone with good to excellent credit. Guarantors are assuming a risk of potentially having to pay back the loan if you were to default on the agreement.

Obtaining a Secured Loan with Bad Credit

A secured loan is one that is tied to a specific asset used as collateral. For example, the lender may provide a loan for a home or a car that the borrower is financing. If the borrower falls behind on repaying the loan, lenders may reclaim or repossess the asset to recoup their losses. Some lenders may approve secured loans to those with poor credit because the collateral potentially minimizes the risks.

Obtaining a Debt Consolidation Loan with Bad Credit

A debt consolidation loan is a possibility for those with multiple debts. This involves merging or grouping several debts into a single consolidated loan. Ideally, the new loan will have a lower interest rate than the existing loans. Having a single loan to repay may also make things easier to manage for the borrower.

Unsecured Personal Loans

Unlike a secured loan, an unsecured loan is issued without requiring an asset to be used as collateral. Lenders largely view unsecured loans as a greater risk and will likely impose high-interest rates. Unsecured loans may be obtained from many sources including banks, credit unions, and many online financial institutions.

Payday loans are also unsecured loans. These are generally personal loans for smaller amounts such as £1,000 for short-term financial needs or less. A payday lender requires borrowers to be employed. The loan is repaid through a series of installments that line up with the borrower’s payday schedule. Generally, these loans are approved quickly, appealing to those with unexpected and immediate financial needs.

Short-Term Installment Loans from Response Funding Limited

Those with an immediate need for cash should consider a short-term personal loan from Response Funding Limited. The loan application may be completed using any internet connected device 24-hours-a-day. A key feature of our unsecured loans is that the approval process is fast. Often, applicants receive the funds on the same business day they apply through a direct bank account deposit. This makes short-term loans attractive to those faced with a sudden utility disconnection or unexpected child-related expenses. The requirements are as follows:

  • Borrowers must be current adult residents of the U.K.
  • You must be currently employed or have another regular source of income.
  • You must have an active bank account that is capable of facilitating electronic financial transactions.
  • The maximum amount that can be borrowed initially is £125.
  • All products have the following loan terms: A 0.8% daily interest rate, an APR of 1304.41, and a fixed annual rate of 292%.

One advantage of our loan offerings is that borrowers with past credit concerns may be approved. These loans also do not require a long-term commitment. We are properly authorised according to the requirements of the Financial Conduct Authority (FAC). We have also created a platform using the latest in online and server technology to protect your personal information and confidentiality. We are a direct lender that allows you to avoid “middleman” fees or broker commissions. Apply for a loan today!