Alternatives

If you don’t own a car or simply do not think that a logbook loan is for you, because there are other options available for people with inferior credit. The following are just some of them.

Credit Unions

If you run into some financial difficulties, one of the first places you should go to for help is your credit union. Credit unions are a sort of non-profit cooperatives, where members can access savings accounts, current accounts, and loans.

Credit unions are a much better alternative to banks and building societies if you don’t have perfect credit rating, but there are still some eligibility criteria that you should meet – known as a “common bond” – in order to become a member of a credit union. This could be the same industry, locality, clubs, or churches that you share with other members. Money Facts UK has compiled a nice and detailed guide about credit unions, which you can view here http://moneyfacts.co.uk/guides/savings/what-are-credit-unions220212/.

Peer-to-Peer Lending

Peer-to-peer lending is another form of alternative lending that you can explore if you got rejected from banks, building societies, or if you are not part of any credit union. Peer-to-peer lending has gained popularity over the years, and serves as an online marketplace where borrowers and individual lenders can meet. Think of peer-to-peer sites as your middleman.

The nice thing about peer-to-peer lending is that you are given more options. Keep in mind though that credit checks may still be performed, however, because you are dealing directly with individuals rather than agencies, you may have a better chance of approval.

Payday Loans

Payday loans are another form of popular lending for borrowers with poor credit. As the term suggests, a payday loan is money lent out to a borrower that should be repaid on the next scheduled payday, whether that may come in about 15 to 28 days. Unlike other loans, the money borrowed should be paid back in full.

Because of the relatively short amount of time needed to make the repayment, a payday loan may not be ideal if you need a huge amount of cash that should take several instalments to pay off. If you are considering a payday loan, make sure that you can afford to pay the money back as agreed, because late fees can be very high.

Guarantor Loans

Meanwhile, a guarantor loan is a type of financial agreement that requires for your application to be backed up by another person. Unlike a co-signer though, your guarantor won’t directly be liable for the account, but will be responsible to take over the repayments if you fail to do so. If you are able to pay back the money successfully, the guarantor doesn’t need to do anything, so if you know someone who trusts you and is willing to help you out, a guarantor loan should be a great option.

However, your guarantor is required to have good credit rating in order to be approved. Guarantor loans may have more competitive interest rates than payday loans, and may allow you to borrow a bigger amount of cash.

Loans from Relatives or Friends

Lastly, if all other options have failed, perhaps the most logical solution left is to approach your friends or loved ones for help. Most of the time, the loans they will give you are interest-free, although don’t expect yet that that will be the case.

Also, make sure that you treat this as a last resort. It can be very uncomfortable to borrow money from people you know, especially when the bond is strong. Failing to keep up with your promises can cause relationship tensions, or could break a good bond altogether, so always keep this in mind.