We all feel the need of taking a loan to fund any purchase or expand the business if you
own a company. There are many instances in life where we are short of money, and we
need to borrow it from someone, be it banks or other financial institutions. Approaching
commercial banks these days isn’t a cakewalk, as there are many stages a borrower has to
go through to get his loan sanctioned.
Approaching the Banks first is a common tendency
If the borrower has a substandard credit history, then banks would reject their application
citing high credit risk. If the borrower fails to produce any guarantor, then also banks will
reject your application if the amount is significant.
Banks also ask for some security to be pledged as collateral against the borrowed amount.
Additionally, the paperwork and application processing time is more, and the process is
There are processing fees as well charged by many banks to consider your application.
Even after all this, there is no assurance that the approval will be sanctioned and it will
further exacerbate your credit score that limits your future chances of borrowing.
If Not Banks, then Who?
Now, as a business owner looking for urgent capital or a retail customer requiring funds
for medical treatment, you will feel exasperated. But you don’t have to go through this
scenario. There is now an alternative and matured route to get a loan in the UK. You can
approach a direct lender to seek loans for bad credit with no guarantor. If everything goes well to your application, lender may allow approval with no fees to pay. Thus, loans
may be the clear choice to fund your emergency or start your business.
These funding sources are specially designed for borrowers having low credit profile and
who cannot give collateral. The business model of these lending businesses revolves
around catering to this segment of the borrowers. Technology is what is making all this
possible as these lenders leverage it using algorithms to assess borrower’s profile beyond
their credit score.
Reasons should be Strong Enough
There are many reasons to choose these loans over those from banks, and these are listed below:
Documentation and paperwork are minimal here, which are quite contrary to when
you apply in a bank.
Also, it is an ideal route of taking a loan for those who are in an emergency as the
application processing time is a maximum one day. Additionally, once it is
approved, you will get the money in your account on the same day.
These direct lenders charge no application processing fees, hidden charges, or a
penalty for late payment. Everything will be black and white in the agreement.
However, it becomes your responsibility to read all the terms and conditions
The best part is you do not have to pledge any security or asset as collateral to get
the approval, unlike a bank.
Apart from being unsecured loans, the lender here also does not ask you to
produce a guarantor, making your life easier.
However, one thing to note here is that the interest rates (APR) are higher. It can
reach up to 40-50% per annum based on the borrower’s profile, borrowing amount
and the tenure.
Many of these online lenders conduct no hard credit checks on the borrowers, so
even if your application is rejected, it will not degrade your credit score.
Some of the necessary conditions of eligibility are: the applicant must be an adult
(18+ years in age), a permanent resident of the UK with a bank account in a UK
For quick funding, the method should be comfortable
The application procedure is entirely online, which means you do not have to take a break
from your work to visit their office. Every process from applying to repaying it is entirely
online. You have to compare different lenders online with the quotes they are offering
and choose the right one for you. Then, visit his website and fill the application form,
which will take 5-10 minutes only.
These lenders then might ask you to upload some documents like your address proof,
business’s financial statements, or salary slip etc. They will access your need for the loan,
verify your documents and gives you an instant decision.
Once the application is approved, your responsibility is to clear all the doubts about the
terms and conditions. It is necessary to avoid any surprises later. Ask whether the deal
has fixed interest rate or floating interest rates, ask for one-time settlement option in the
agreement, ask for moratorium period, ask for refinancing facility etc.
Another good part about these lending platforms is that you can visit their website to
check the monthly instalment amount. You have to enter the desired amount and tenure,
and their automatic loan calculator will give you the monthly instalment which you have
to pay based on the interest rate they are charging. It will help you to plan your finances
in a much better way since you know your monthly liability upfront.
Description: The sole purpose of this blog was to make readers aware of an alternative
source of financing in the form of loans for bad credit with a comparative analysis
between banks vs. a direct lender.