Type in “online poor credit loans” into Google and you’ll be exposed to thousands of different pages from lenders and from brokers like Oyster Loan on this very subject. With all the changes that took place in the last few years to standard online poor credit loans like payday loans and short-term instalment loans, what do you need to know about online poor credit loans today?
In this article, the Oyster Loan team looks at:
- the advantages of online poor credit loans,
- its disadvantages, and
- whether you should apply for online, directly or through a broker?
Online Poor Credit Loans – The Pros
You would have struggled to miss the controversy surrounding payday loans and short-term loans a few years ago. There were lurid headlines in the newspapers, politicians expressing anger and disgust, and even the Church of England declared war against the now-defunct Wonga.
The market has changed so much so, in today’s climate, what are the pros of taking out an online poor credit loan?
You CAN borrow money
It’s a statement of the obvious but, even before the industry came under tighter regulation in the mid-2010s, online poor credit loans applied for via the internet and on mobile phones really opened up finance to people who had traditionally been shut out of it.
A renter? “No thanks”. Less than perfect credit history? “No thanks”. Only need a few hundred pounds to tide you over? “No thanks”. Generations of Britons got used to this terrible attitude from the banks towards their financial hopes, needs, and aspirations.
Online poor credit lenders changed all that. They were different and they were proud of their difference. A renter? “That’s fine”. Less than perfect credit history? “We’re OK with that”. Only need a few hundred pounds to tide you over? “How much do you need?”. Millions of Britons in whom the banks and high street financial institutions had no interest now had lenders who understood them and how they lived their lives.
Very quick approval
Sometimes, a financial emergency creeps up out of nowhere and it has the potential to drain all of the cash we’ve got saved away in our current account. It could be a funeral, it could be medical bills, the boiler might need repairing, or the car might need taking to the garage.
Sometimes, there isn’t time to wait for an answer. You need to know now. Thanks to the immediacy of the internet and some very sophisticated computer algorithms, Britons could now take a couple of minutes to answer a few questions and they could receive their online poor credit loan approval within seconds. Once they had agreed to the terms of the loan and they had signed the online documentation, the money could be with them within an hour (depending on the lender and the bank).
It can help you improve your credit score over time
On the credit records of millions of people in our country are missed payments and the odd default. Traditionally, that would shut them completely out of the loan market despite the fact that, in the last ten years, most of the financial difficulties people have suffered were caused by the fact that prices in the shops were going up faster than people’s pay packets.
Online poor credit loans offer borrowers a real opportunity to place positive information for other lenders to see on their credit reports. If you meet all the repayments on time and in full, that will show on your credit record and other lenders, when considering an application for a loan from you, will see that you are responsible with money and that you can handle your own finances really well.
Borrowers protected under the legislation
Earlier, we mentioned how the online poor credit loans market had changed. In 2015, the Financial Conduct Authority, the governing body for financial services in the UK, laid down special rules for online poor credit loans with a particular focus on both payday loans and short-term instalment loans.
Now, any borrower taking out a payday loan or short-term loan benefits from three really important protections not available on any other form of credit currently offered in the UK. Those three special borrower protections are:
- you’ll pay no more than 8p per day for every tenner you borrow
- if you miss a repayment date, you’ll be charged no more than £15 in default fees
- when added together, the amount you pay in interest and in fines must come to no more than the amount of money you borrowed in the first place.
One of the most important features of online poor credit loans is that you don’t have to put up any security on your loan. That means you don’t have to gamble with your house (like with a secured loan), your car (like with a logbook loan), or your valuables (like with a loan from a pawnbroker).
No one will come and take anything away from you that you own if you find that you can’t make the repayments on your loan or you end up defaulting on the loan. However, there are consequences to this and we cover those consequences later in this article.
Best of all, our lenders never ask for a guarantor on the online poor credit loans they offer. That means no awkward asking friends or family members to pay off your loan if, for whatever reason, you can’t make the repayments on your loan or you default on it.
No matter how much you might love someone, how much of a spot would you be placed in if a friend or family member told you that they wanted to borrow £20,000 and that they wanted you to stump up the money if they fell on hard times? It’s best not to have that conversation at all, in our opinion.
Online Poor Credit Loans – The Cons
Of course, as with every product or service out there, as well as the advantages, there are the disadvantages. Before you apply for any loan through us, we want you to be absolutely sure that you know what they are and that you feel comfortable with them.
Higher interest rates than you’d get at the bank
The reason that interest rates are higher on online poor credit loans than they are at the bank on the high street is that, statistically, far more borrowers taking out an online poor credit loan will not be able to pay their loan back than borrowers who are approved by their bank.
Online poor credit loan providers know this and they’re happy to take the risk. However, the only way they can operate is to charge more interest to the people who do pay their loan back. The interest charges that you and other good borrowers pay provides protection for your lender against those borrowers who aren’t as good with money as you are.
Defaulting on one could make getting more credit very difficult
Earlier, we mentioned that, if you defaulted on your loan (meaning that you can’t pay it back), your home would not get repossessed, your car would not be taken away from you, and you’d get to keep your valuables. Also, and importantly, your loved ones, your friends and family, would not have to pay your loan back.
Please be aware that it is vitally important that, before you take out an online poor credit loan, you are absolutely certain that you can afford to meet all the repayments on time and in full.
If you don’t and if you default on the loan, your lender will expect to be paid. Under the special rules governing online poor credit loans, your lender will direct you to a debt charity who can negotiate a settlement on your behalf – that settlement might include halting interest on your loan and it might include giving you much longer to pay your loan back.
However, the fact that you couldn’t meet the repayments will be recorded on your credit file and this will make it next to impossible to gain access to any further loans for the next six years. If you then can’t keep to the terms of the agreement you come to with your lender on repaying your loan, they will want to impose a County Court Judgement against you. If that happens, there is a near 0% chance that you will be approved for a standard bank account, a credit card, a personal loan, a car loan, or a mortgage for the next six years.
Please be absolutely certain that, before you apply for any type of finance whether through Oyster Loan or not, you know how you’re going to meet every single online poor credit loan repayment in full and on time. If you’re not sure, please do not make an application.
You may not be able to borrow very much
Online poor credit loans are mainly offered to borrowers as either payday loans or short-term loans. With a payday loan, you borrow a certain amount of money from a lender and you pay it back in full (plus interest) on an agreed date – normally when you next get paid or within 35 days. Payday loans are generally for between £50 and £1,000.
Short-term loans are taken out for between three months and twelve months. You can normally borrow a lot more with a short-term loan than you can with a payday loan – expect to be able to borrow, if approved, between £250 and £2,500.
If you need to borrow more than £2,500, then you may need to look at alternative forms of finance like logbook loans and guarantor loans, each of which, as we’ve seen, comes with a lot of risks.
Go direct or use a fully licensed broker like Oyster Loan?
Now you know the advantages and disadvantages of online poor credit loans, should you apply directly to one of the dozens of direct lenders or the hundreds of brokers like Oyster Loan?
You might think that you’d get a cheaper deal by going directly, in many cases, that’s not actually true for a lot of different business reasons. There’s also something else to consider – when a lender gets a request for a loan through a broker, they know that the broker will have proposed the loan to other lenders. Lenders want the business so they’ll compete against each other to get it. The only person that benefits is you because you might pay a cheaper rate through a broker than applying direct – if you apply direct, a lender may assume that they’re the only company that you’ve approached.
Let Oyster Loan try to secure the best deal on your behalf. You will never pay us a penny for the service we provide and there’s no obligation to accept any quote we find you. When we do find you a quote, we tell you everything you need to know to make an informed decision – the interest rate, the size of the repayments, and the overall cost of the loan.
To apply for an online poor credit loan through Oyster Loan, please click here.