Bad credit loans are aimed at subprime borrowers. They are small loans that help tide you over during small financial emergencies. For instance, they can prove to be fruitful to repair a car. While subprime loans are easily approbated, there is still no guarantee that your application will be signed off on. A bad credit approval never suggests that you can get the nod even at a very poor credit rating. If your credit score is lower than the acceptance range that lenders follow, you will never be able to receive approval from them.
But some lenders are out there who provide a guarantee on approval. Such a claim insinuates that you can get approval regardless of your credit score. You must have come across direct ender bad credit loans with a guaranteed approval, but when you formally put in the loan application, you will end up being repudiated.
The reality behind guaranteed approval
First off, you need to bear in mind that no lender can guarantee approval. They do not have the foresight to know about your repayment capacity without you submitting a loan application. No registered lender is permitted to make such claims. If you find any lender that guarantees approval, it is a red flag. Such lenders cannot be ethical and registered lenders. They will be loan sharks who target gullible subprime borrowers to extort money by charging very high interest rates. Unfortunately, you cannot make a complaint against a lender if you were aware of the non-registration of a lender.
In order to approbate your application, a lender would have to:
- Carefully peruse your credit report. Interest rates are decided based on your credit score. If your credit score is worse, high interest rates will be charged or otherwise lower. If your credit score is extremely poor, most of the lenders will repudiate your application.
- Check your income sources. Having a good credit history is not enough in order to qualify for a loan. You must prove your repayment capacity. If your budget does not have the wiggle room to settle the debt, no lender would sign off on your application.
So, when you come across any lender making a claim of guaranteed approval, you should not take it seriously. These loans can be dangerous because they charge exorbitant interest rates and additional fees and charges.
Such loans come with a very small amount of money and therefore you are obligated to settle them in fell one swoop. A golden rule of thumb says that you should apply for these loans only when you are completely certain about your repayment capacity.
For some lenders, guaranteed approval is meant as guaranteed acceptance
Various direct lenders are out there who accept applications from subprime borrowers, but people with extremely poor credit scores find it extremely challenging to have their applications approved. However, some lenders claim a guarantee in terms of acceptance. In other words, they mean that they accept applications from all types of subprime borrowers. Even if your credit score is extremely poor, you can put in your loan application. No application will be rejected on the grounds of a poor credit rating.
But it also implies that your loan will be approved only when you prove your repayment capacity. Regardless of your credit rating, you are required to prove your repayment capacity. If your income is low and it is suspected that you cannot settle the debt on time, your lender will reject your application.
Before applying for a loan, you should ask your lender whether they accept applications with your credit score. This will remove the possibility of being rejected on the grounds of a poor credit rating, and you can protect your credit score.
No refusal payday loans are part of guaranteed acceptance loans
Payday loans are small loans that you take out to meet small unexpected expenses. These loans are aimed at subprime borrowers, too, but they do not require a credit score check. Because no credit report is perused by your lender, they are advertised as guaranteed approval loans. No refusal payday loans in the UK from direct lenders are legitimate loans. The FCA has put a cap on interest rates of these loans. No lender can charge more than 0.8% per day.
Payday loans can be applied for by those whose credit scores are abysmal, but bear in mind that lenders will approve your application only when you can repay the debt. You will have to demonstrate your ability to settle the dues on time. Here comes the role of your income sources. While bank statements can let your lender gain insight into your repayment capacity, most of the time they depend on income and expenses details that you provide in the application form.
Therefore, it is suggested that you provide them with accurate details. If you do not disclose your true financial details, you will likely end up borrowing more than you can afford. As a result, you will have to keep rolling over the loan. Soon, the cost of the debt will quickly mushroom, and eventually, you will fall into debt.
Summing up
Guaranteed approval does not exist. No lender can guarantee approval without running an affordability check. However, some lenders use this term to mean guaranteed acceptance. They encourage people with extremely poor credit ratings to borrow money, but the approval is made based on their income.
Payday loans do not require a credit check, especially if the borrowing amount is less than £500. The approval is guaranteed as long as you have a strong repayment capacity. Though bad credit loans are easily available, a rule of thumb says that you should do up your credit rating. This will improve your chances of qualifying for a loan at lower interest rates.
Jessica Rodz is the Senior Content Writer at Cashfacts. She has a long career in the field of content writing and editing. Jessica has the expertise in the UK lending marketplace where she has worked with 7 different lending organisations and acquired many responsibilities from preparing loan deals and writing blogs for their websites.
At Cashfacts, Jessica is managing a team of experienced loan experts and doing a major contribution in guiding the loan seekers via well-researched blogs. She has done graduation in Business (Finance) and now currently doing research papers on the UK financial sector.
