Applying for a loan is often required when you’re starting up your own business, but being accepted isn’t always straightforward.
If you’ve already borrowed money or have had issues with repayments in the past, you might also have a bad credit score. In this situation you’ll need to find out if you’re eligible for a bad credit loan. There are two ways you can find out what your eligibility might be:
Read on to find out more about bad credit loans and checking your eligibility prior to submitting an application.
What are bad credit loans?
- Personal loans for those with bad credit
- Often have higher interest rates than a standard personal loan
- Ideal for those who have had issues with borrowing in the past, are self-employed or have a thin credit file
Bad credit loans are designed for those with a bad credit score who would still like to borrow money. They will normally have a higher interest rate than standard personal loans, meaning you will have to pay back more interest overall.
Your credit score is often dictated by your ability to manage money and repay the debts that you owe. If you have missed payments on a personal loan, credit card or mortgage, chances are you will have a lower credit score than someone who has comfortably made monthly repayments.
If you have a bad credit score due to previous missed repayments you will often struggle to be accepted for credit, so will instead have to look for alternatives such as a bad credit loan.
Bad credit loans for self-employed
Sometimes you might have a bad credit score because you still owe multiple debts, despite not missing any payments. This can occur when setting up your own business, as you will have initial expenses before you start earning a profit.
In this instance you may be seen as less likely to be able to pay back a standard loan as you already owe a lot of money. It might be that a bad credit loan is your only option in this regard, especially if you have urgent expenses that cannot wait for you to improve your credit score.
What do I need for my self-employed loan?
To apply for a personal loan, you will need to provide personal information to prove who you are and to prove you can afford to repay the money you’re intending to borrow. This is slightly more complicated if you’re self-employed, as you will need to show evidence of your income to show you have a regular wage you can use to make repayments.
You may need to provide the following when making your application for a self-employed loan:
- Proof of income – usually in the form of bank statements or documents from your accountant proving what you earn
- Proof of what your business earns – since some lenders will ask for a minimum turnover per month, it’s important for you to provide evidence that will corroborate this figure
- Business registration details – this might include your Companies’ House number and your Data Protection registration number
- Proof that your business is UK-based – some lenders will require you to prove you’re based in the UK so you will need to provide your registered address
Start checking your eligibility
Whether you’re looking for a bad credit loan, or any other type of loan, it’s always worth checking your eligibility using moneymatcher so you don’t put your credit score at risk.
This is especially important if you already have a bad score, as you wouldn’t want it to get any worse. Once you have a good indication of what you’re likely to be accepted for, you can then submit an application for a loan. Alternatively, you might want to take steps to improve your credit score.