Extramile Finance

Poor credit scores are an obstacle when you try to get a loan. There are a few parameters based on which the lender would decide the suitability of your financial profile. Credit scores are one of them, and they can influence the lending decision.

The repayment capability of the borrowers makes huge sense to the loan providers. Credit records can give them a glimpse of your past financial performance. Good scores establish that you have paid the debts on time.

This further confirms that you can repay loans on time. On the flip side, bad credit shows a track record of skipped payments. Such performances are sure to raise a doubt in the lender’s mind.

Oftentimes, the ultimate approval decision is taken based on this. However, some lenders might consider an alternate way of validating whether or not you can repay loans. This is done through assessing your affordability.

Furthermore, some would ask you to produce a guarantor or collateral. These are means of neutralising the impact of the risk involved. Now, borrowers who do not want to take this route would definitely find a loan option to be pricey.

Bad credit = Higher risk   Lender charges more interest to make you compensate for the risk extent.   No guarantor = No safety net   Without a guarantor, there will be no security to reassure the lender about the on-time payment of loans.

Reasons why no guarantor bad credit loans are expensive

A guarantor becomes inevitable if the lender is not happy with your affordability. This happens when your credit scores are terrible. You can apply for very bad credit loans with no guarantor claim with a direct lender.

However, be ready to face high rates of interest. This is because, here, you want loans without a guarantor when your credit scores are very low. The lender would require some way to balance the risk factor.

Thus, you must understand that rates are not charged high deliberately. This is to make sure that you turn up for timely payments of loans. Otherwise, no one will be able to save you from the racking up pile of debts.

The various reasons why lenders would levy high interest rates for no-guarantor loans with bad credit.

·       Restricted access to funding

When credit scores are not favourable, you will face denial from many lenders. A very few of them might be willing to help you with loans. You will not get any acceptance from traditional lenders as the credit score factor is non-negotiable for them.

Thus, when you have limited ways to search for help, some lenders will take advantage of this situation. They will impose high rates of interest as they know you do not have a lot of choices to verify and accept. Thus, you must work on improving your credit profile to be able to explore better and feasible choices.

·       Too risky for lenders

As you know, credit scores are a standard criterion for lenders. When you fail to satisfy this condition, it automatically becomes risky for the lender. Poor credit testifies that you have failed to complete certain payments within the given time frame.

Thus, you will have a tendency to delay payments. This might cause late payments of loans, and the lender cannot accept this aspect. Despite this, if they agree to offer you a loan, it means they are trusting you and taking a chance.

Now, to avert the likelihood of being a complete loser, the loan provider will take the opportunity to raise the rates. Then, you will have to pay more even in a monthly pattern. This will make sure that the lender gets back as much money as possible, even within a shorter tenure.

·       Shorter terms of repayment

No guarantor loans are meant for covering any small cash emergency. Thus, the repayment tenure will not extend further, and you should complete repayment within a shorter term. Now, when you get a longer duration, you automatically agree to pay more interest.

With more days, the total cost paid by you will be higher. Now, the meaning of opting for a shorter term would be to cover payments within a few months. To let you avail of this facility of getting loans for a compact duration, high rates are charged.

Again, this is a way to get the desired interest amount back even when the tenure is not too long.

·       No collateral involvement

When no guarantor is involved but you have low credit scores, assets are another way of ensuring the timely payment of loans. The lender will have the right to use your assets to recover the loan payments in the case of non-payment.

Thus, pledging collateral is like putting your assets at stake. You may or may not get them back. However, the trick here used by lenders is to compel you to repay.

If you want your assets back, you will do the needful to arrange funds. This will make sure that you will gather the necessary funds meant for repayment. Now, when collateral is not even involved, the lender will have no other way to neutralise the risk factor.

When this avenue has also been closed, the lender is left with one option only. It is to increase the interest rates so that you pay back on time.

The bottom line

If the price aspect is bothering you a lot, you can try approaching private lenders in the UK. They are willing to offer financial help in the form of loans even when your credit scores are not outstanding. It does not mean that they will not look for any assurance.

Here, your affordability can play a pivotal role. This can be established with the help of your present earnings and recent financial dealings. The lender will have no problem accepting your low credit scores if you have begun a credit improvement journey.

This can only be possible if you have stabilised your income. At the same time, you must be able to take care of your recent financial commitments. The lender can feel confident about getting loan payments on time from you.