Rinalds Uzkalns

Nobody intentionally puts themselves in the situation where their credit rating goes downhill and you end up with a bad credit rating but the unexpected can happen to anyone. Once you have a bad credit rating, it can become more difficult to borrow money than with a good credit rating but there are options available to you. Here are some top tips.

Friends and Family

The best interest rate you are liable to get is if you can borrow money from friends or family. If you do have someone who can help you, make sure you treat the loan like you would one from a bank – set up a payment plan, stick to it and put it all in writing so both parties know where they stand.

Bad credit rating credit card

There are quite a number of companies now who either have a range suitable for those with a bad credit ratings or who specialise in nothing else. These tend to allow a smaller credit limit and the amount of interest paid will be higher but it is a start on the ladder to a better credit rating. Some even offer a beginners interest rate of 0% for a fixed period of time, so look out for those.

Bad credit rating loan

Similar to the credit cards, there are loan companies who specialise in lending to those who have a bad credit rating. They are more expensive than a normal unsecured loan but being that these aren’t available to those with bad credit, this is a moot point. Look for the one with the lowest interest rate and that you meet the eligibility criteria for then make sure you pay it on time. This is another way to start building up your credit rating once more.

Social loans

Social lending is a relatively new idea that was launched in 2005. It is where websites match people needing to borrow money with people willing to lend it for a decent rate of interest. The idea is to cut out the middle man such as the bank. Most sites work that the money is given to the borrower and they pay it back to the site who then forward it to the lender.

Secured loan

If you have a house, car or even expensive jewellery, then you can take a secured loan against the value of these items. Homes tend to be the most common option for this type of loan and there are options for those with poor credit ratings based on how much your assets are worth. However, it can work out expensive because they tend to be taken over a long period of time, like a mortgage. Also, should you not repay the loan, you could face having the asset take away from you and this includes having your home repossessed.

Credit Unions

Credit unions are an option not available to everyone because they are legally not able to lend money to just anybody. A credit union is a non-profit financial cooperative so this means they are owned by their members of customers. This may be people in a certain industry, organisation or community so if you fall into any of their categories, you may be able to join the credit union and borrow money from them. There are around 500 credit unions in the UK.