There are many different types of loans but if you have a poor credit rating then your choice will be limited. You might find that you will have a choice between a payday loan and a guarantor loan as these are both available to those with a poor credit rating. You might really need the money and therefore have to turn to one of these types of loans.
It is important that you choose the right one for your needs as they are quite different. Therefore, consider these points and it should help you to choose.
How much to borrow
The amount that you can borrow will vary between the two loan types. The payday loans tends to lend a few hundred pounds maybe up to a thousand. The amount you can borrow will tend to be low the first time you use a payday loan and the amount you get offered may increase if you show that you are capable of repaying the loan. This will vary between lenders.
The guarantor loan tends to lend larger amounts of money, perhaps in excess of a thousand pounds. This means that this could be a better option for you if you want to have more money. However, it is wise to never borrow more than you need as it is expensive.
With a payday loan you will normally have to repay everything you owe at once. This will be a payment that is scheduled by direct debit to come out on the day that you are paid. You will have to find the money to repay the loan and the interest all at once and then manage for the rest of the month having paid that money out.
A guarantor loan has payments spread over a longer time period. This may mean that you will not have to pay out so much each month which could make the repayment more manageable. You will also have a guarantor to pay any repayments that you cannot afford which will help you out if you need it.
Do you have a
You will have to find your own guarantor if you want this sort of loan. This means that you will need to have a friend or family member who is willing to help you out. They will have to have a good credit record and sign up to cover any payments that you do not make. They will be liable for these and it will then be up to you to agree with them as to whether you have to pay them back and if so when you will do this.
With a payday loan you have no guarantor so you do not have to find someone to help you, but you will have full responsibility for repaying the loan yourself.
Length of loan
If you have a payday loan then it will need to be paid off in full after a few weeks. A direct debit is set up so that all of the money goes out at once on the day that you are paid. This means that the loan does not last long at all so you do not have to worry about being in debt for a long time,
With a guarantor loan, the payments are spread over a longer period. This is partly because there is normally more to repay so paying it all back at once would just be too expensive for anyone. It means that you will have the loan for longer but it could be easy to repay it.
Cost of the loan
Costs of loans vary a lot depending on which lender you use. Both of these types of loans can be comparatively expensive as no credit check is done and therefore the lender is taking a risk by offering the loan to borrowers. The guarantor loan has someone willing to pay, but it is still expensive as it is more complex and time consuming for the lender to organise this and so they charge more as a result. It is always wise to compare the costs of various loans and see how lenders compare. Make sure you compare the amount that will be repaid in full, including the interest and any charges, rather than just looking at the interest rate as this may not always tell the full story.
So as you can see, there are several important factors that you need to consider when you are deciding between the two types of loans. It is worth giving it a lot of thought as it could affect how easy it is for you to repay the loan, how expensive it is and how long you have it for. All of these factors are important but be sure to think about what is most important to you.Continue Reading