Bad Credit Personal Loans

What is a direct lender?

A direct lender is a private lender that directly provides you with financial products like mortgages, credit cards, and short-term loans to you. It means it does not involve a broker or mediator in the processing of a loan. Back in, traditional methods were the only means to borrow money, but certain complications made the processing convoluted and time-consuming, which brought forth direct lending.

Direct lenders are online lenders that carry out the entire process online from putting in the application to the disbursal of money. Direct lending came into existence to help people borrow money who due to some reasons, fail to get money from mainstream financial institutions. Traditional lenders are strict with their policy. They do not entertain applications from borrowers who have bad credit because it raises doubts about your credibility.

However, after extensive research, it was discovered that there were some circumstances when people fell behind repayments because of some unavoidable reasons like being sick in the hospital. Bearing this fact in mind, direct lenders began to offer loans to people with bad credit with no guarantor.

All UK direct lenders provide short-term loans and mortgages to borrowers with poor credit rating, but they follow a different policy. Therefore, it is paramount to shop around before applying for the loan.

What are the types of loans direct lenders offer?

There are various types of loans, but all of them are classified into two categories: short-term loans and long-term loans. Short-term loans are those that include a repayment length not more than five years, and long-term loans are those that have a repayment period of over five years. Best examples to understand both types of loans are personal loans and mortgages.

However, there is still more you need to understand about them. The way direct lenders advertise their financial products is often discombobulating. Since each loan has different features and works differently, you may have to put a lot of effort to decide which loan to take out.

  • Most common short-term loans are personal loans, payday loans and unemployed loans.
  • Note that instalment loans and bad credit loans are not a different type of financial product.
Both personal loans and mortgages are instalment loans. They require you to pay off in fixed monthly instalments. A bad credit loan can be a personal loan or an unemployed loan because a loan taken out despite a poor credit rating is called a bad credit loan.

Personal loans

Personal loans are unsecured loans, which mean they do not require collateral. Since you do not secure your loan against a valuable object, you do not need to lose it in case you fail to pay it off. It depends on lenders how much they allow you to borrow. While some may allow for borrowing up to £7,500, the others will put a cap on £5,000.

Note: When you take out unsecured personal loans with bad credit, you will have to pay a high-interest rate. Like a standard personal loan, you will be able to borrow up to £7,500 depending on the lender’s policy.

Payday loans

Payday loans are also short-term loans, but they will allow you to borrow a nominal amount, not more than £1,000. Regardless of what you borrow, you will have to pay the loan in a lump sum. The length of these loans is generally two weeks that can go up to four weeks in some cases. Since payday loans target bad credit borrowers, you can consider them guaranteed bad credit payday loans. Some online lenders advertise these loans as 1 hr payday loans because you can get the funds within one hour without guarantor after filling up the form.

Unemployed loans

Unemployed loans are also small cash loans but only target the unemployed. As you do not have a full-time job, the lender will take into account other income sources like a part-time job to look over your repaying capacity. Doorstep loans are also a type of unemployed loans. The only difference is it targets the disabled and senior citizens. Rest of the features of these loans are the same as payday loans.

Long-term loans

Long-term loans are secured loans, which mean the amount you borrow will be secured against a valuable object like your home or car. Getting a long-term loan with bad credit or No guarantor can be a bit tricky because they tie-up with debt for about 20 to 25 years. Compared to short-term loans, they are much more manageable because the collateral lowers down the interest rate. However, there is always a risk of losing your valuable asset.

What benchmarks do direct lenders follow to sign off on a loan?

Most commonly advertised terms are no credit check, no guarantor, and fixed monthly instalments. It seems like direct lenders need nothing to evaluate your repayment capacity, but it is not as seems.

  • You will have to submit your income statement and bank statement that lenders will use to check your net worth. For instance, you should have at least £500 as net worth in your account to apply for a payday loan.
  • A lender will look at your credit score to find out if you had been committed to your past financial obligations.
Note that payday loans require no credit check. Application, as well as repayment of these loans, will not affect your credit score. However, missed repayments will pull your score.
Some lenders run soft inquiries to check your report when you apply for short-term loans other than payday. Such inquiries do not show up on your credit file, and hence, there is no risk of losing your credit score.

How do direct lenders process the loan application?

Online lenders follow an entirely different way to process a loan application from traditional lenders. Now you can apply for any loan, including long term without the hassle and consuming much of your time. You need to follow the following steps, and you will get money in your account:

  • Fill in the form online.
  • You will submit your income statement and bank statement.
  • You will have to wait for approval. In the interim, the lender will examine your documents and check your credit score.
  • You will get an approval message on a registered mobile number and registered mail id along with a loan agreement that you will sign and submit.
  • Once you submit the agreement, you will get money in your account.

Why should you prefer online lenders to brokers?

When you approach an online lender, you do not need to pay processing fees. This is because you are in direct contact with the lender. However, if you apply for these loans with a broker, you will have to bear additional charges – broker fees.

Brokers will assess your application and find a lender for you that suits your needs and budget. When you apply to a broker, you do not need to shop around because the broker will carry out all formalities. This is why you are supposed to pay more.

Why should be Easy Cheap Loans your direct lender?

Easy Cheap Loans is an online lender offering a wide range of financial products, but our policies are different from the rest of the lenders. Here is what set us apart:

  • We run a credit check for all types of loans. However, if you are a bad credit applicant, we will run soft inquiries in case of only short-term loans to ensure that you do not lose your score further.
  • We offer a payment holiday once a year for long-term loans if you are in a tight spot due to emergencies. However, interest will keep accruing for non-payment months.

FAQs

What is the difference between a direct lender and broker?

A direct lender is an online lender that directly lends you money without involving a mediator. The entire processing of loan application is between you and your lender, which means you are in a direct contact with your lender. A broker cannot be direct lender because it acts as a mediator between you and online lenders. Based on your application, the broker will find a suitable lender for you.

What are the benefits of borrowing money from direct lenders?

Here are the benefits of borrowing money from direct lenders:

  • You will get money based on your affordability.
  • Since it does not involve the role of a broker, you do need to pay any brokerage fees.
  • You will get a personalised repayment method, so you do not struggle to pay off the debt.
  • You can get a piece of advice when you struggle to repay the debt.

Who is the best direct lender in the UK for bad credit loans?

It is hard to explain who the best direct lender is because it depends on your needs and financial condition. As long as a lender takes into account your needs and repayment capacity, you will get the best deal.

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