So you can’t get a loan? But you REALLY need some money now.
Cheap loans can be tough to find if your credit’s not great – which is ironic given how low the Bank of England base rate is at the moment.
So what do you do if you’re refused a loan? Don’t despair – we have some alternatives for you to explore depending on what your need is.
- Credit Unions offer reasonable small loans
- Alternatives to loans
- Get a loan from your boss
- Fair For You – a charitable alternative to horrors like Brighthouse!
- Have you spoken to your union?
- What about pawnbrokers?
- Alternatives to loans
- Making your credit record MUCH better
- Help from debt advice charities
You don’t have to go to a payday loans company or other high cost credit provider if you’ve been denied a loan by your bank.
Happily, there are more and more places you can go to for help and fair loans nowadays. Here are some to choose from. And remember, in many cases you might be able to do without a loan altogether, as we explain here.
What are credit unions?
Credit unions are set up and run by a group of individuals who have something in common – for example, they live on the same estate or in the same town, or they do the same job (hence a nurses’ or cab drivers’ credit union, for example).
There aren’t many credit unions in Britain but they are big in America, Ireland and many developing countries. They’re getting stronger here after some recent legislation, but they are still seen as ‘fringe’ lenders. However, if you have one locally you should certainly consider joining.
How do they work?
They are somewhere between a bank and a co-operative. They offer low-interest, easy-to-use saving and borrowing for their members. Members of the union invest any money they have in savings in return for a good and reliable savings rate. This money is then lent out to other members who need to borrow money at an affordable rate. So everyone benefits – lenders get a good rate of interest on their money and borrowers don’t have to pay through the roof.
As well as savings and loans, many credit unions also offer current accounts (allowing members to manage their money through services such as ATM machines and Direct Debit). You need to be an established member of a credit union before you can get a loan from them.
The three main aims of a credit union are: to encourage its members to save regularly, to provide loans to members at very low rates of interest, and to provide assistance to members in need of financial help and advice.
They are usually thought of as organisations for people on low incomes but, if you’re a saver, a recent Which? magazine report showed that the rates of return are often higher than those offered by the main banks.
The union is completely controlled by members so any profits are ploughed back into the organisation. It is pleasant to know that profits on your transactions aren’t being pocketed by City Fat Cats.
To find out if there’s a credit union near you, or one that you could join, take a look at FindYourCreditUnion.co.uk
Many credit unions charge you 1% a month on the reducing balance of the loan (an APR of 12.7%). Some charge less, others more (though by law they can’t charge more than 2% a month – an APR of 26.8%). The size of the maximum loan also varies from union to union.
Find out what sort of loans and interest rates are available from your local credit union by contacting them via the credit union search tool. Most credit unions tend to be flexible over the frequency of your repayments, offering you the opportunity to pay back your loan on a weekly, fortnightly or monthly basis.
You can work out a rough estimate of how much a typical 1% credit union loan will cost you by using a loan calculator.
There are no hidden charges with credit union loans and no penalties for repaying the loan early. Life insurance is also built in at no extra cost – so if you were to die before repaying the loan, insurance would cover the cost for you.
Most credit unions can lend for up to five years (unsecured) and up to 10 years (secured). However some lend for up to 10 years (unsecured) and up to 25 years (secured).
If you work full-time or part-time it’s possible that you could get a cheap loan from your company.
A lot of businesses routinely give employees loans (usually interest-free or at very low interest) to buy a train season ticket. But they can lend for other reasons too. It really depends on the size of the company, their financial resources and their policy when it comes to making loans to employees.
getting started asking your boss for a loan
Approach your human resources department, your supervisor or your actual boss (in a small set-up) to ask if there is a loan programme or payday advance option in place.
If there is, then your next step is to agree an amount that you can borrow. Once you are both happy with that, work out a repayment plan and get it down in writing.
- Work out how much will come out of your pay each month until the loan is paid off, plus (if necessary) how much extra you will pay on a regular basis.
- Your boss may have legal limits on what can be taken out of your pay each month so check on that.
- They are also likely to have a limit on how much they can loan (for example, anything over £10,000 will attract tax.)
- Present your repayment plan to your boss and truthfully tell them your situation and how you will pay it all back.
- Then pay off the loan as quickly as possible. Remember that you will be living on a lower income each month until the loan is paid off. Factor that into your monthly budget.
or get a loan from work through hasteepay
If your company is signed up to Hasteepay then you can have access to some of your pay early in the month.
Hasteepay is a clever app that will give you access to some of your pay once you have worked for at least two weeks of your month. It will allow you to take up to half the pay you have worked for so far.
There is a small charge to take the money early. Either you or your employer pays it (usually it’s you) but otherwise it’s basically a payday loan without the nasty interest.
If your company doesn’t run a scheme like this then you could mention it to them. Many employees need money early in the month and have to pay high cost credit charges. Let your boss know that this sort of system could massively reduce stress and absenteeism in the workforce.
Do you need a loan for a washing machine, a sofa, a TV or a children’s bed?
If you have poor credit you might be looking to get one from a high cost lender like Brighthouse. But you don’t have to get an unfavourable bad credit loan.
Fair For You is a charity-backed loans provider for household products.
It offers reasonable and flexible loans that can be paid off monthly and, if you suddenly get some extra cash, can be paid off in full at any time.
CEO Angela Clements says: Our customers can choose the repayments they want to pay to suit their budget, weekly, fortnightly, monthly or even four weekly’
They offer ‘soft search’ which allows lenders and consumers to run an eligibility check without affecting a consumer’s credit rating, whereas a hard search like the name suggests provides lenders an in-depth look into a customer’s credit history and this is tracked onto a consumers credit file.
Fair For You has won LOADS of awards for their fair and reasonable rates. They also have five stars on TrustPilot so you can use them with confidence.
Klarna offers small loans which don’t need to go through a hard credit check first. This is particularly helpful as it reduces the number of searches on your credit report – something that can stop you being offered a loan or mortgage later.
You can only use Klarna loans for purchases from certain online companies (such as ASOS, Michael Kors, Oliver Bonas and more), so it’s not of much use if you need the loan for something else.
You don’t get charged interest or fees but if you don’t pay the debt back that will harm your credit record even more.
Klarna also offers longer pay-by-instalment plans called ‘Slice It’, where they charge some interest and with hard credit checks.
If your credit score is really bad, you could also consider credit restoration services.
If you belong to a union or professional association you may qualify for a hardship grant, depending on your status and what you need the money for.
Different organisations have money for different things.
- For example the Unite Benevolent Fund helps their members who need money because of illness or other problems.
- There is Community which helps people in work and their families.
- Unison union which covers all sorts of public sector and commercial employees has a financial assistance wing.
So contact your union to see if you might qualify for a grant or cheap loan.
Then there are many, many professional associations that have a charitable arm specifically to help members in some distress. From hairdressers to chefs to even journalists (yes!) there are professional associations with money that can be used to help members buy things they need from clothes for the kids to furniture to taxis to take them to and from hospital.
Even if you’re not a member you might be able to access some money if you used to be a member. Try it..
Make no mistake, pawnbrokers are high cost credit. However, they’re not too bad for really short-term, ‘desperation’ loans if you just need some cash for a few days or a few weeks.
Some people have used them well and found them to be a handy way to borrow, but they are definitely not right for long-term borrowing. They’re FAR too expensive (though nowhere near as expensive as payday loans).
How do they work?
Pawnbroking is a relatively old-fashioned way of borrowing money, the slogan ‘Lend yourself money’ is often used.
- This means you hand over a watch or a gold ring to the pawnbrokers and they lend you usually half the agreed value of the goods.
- The item can then be purchased back from the pawnbrokers for the amount of the loan plus an agreed amount of interest.
- The value of the goods is determined by the pawnbroker, so take care in choosing an item to pawn, sentimental value doesn’t count and it is possible that you’ll lose it!
Take time to understand the full terms of the loan before accepting an offer.
- Many include a maximum six month repayment period, whereby items not collected are deemed to belong to the pawnbroker.
- The amount of time and interest the loan carries is governed by the pawnbroker. If the loan is not repaid or extended the pawned item will then be offered for sale.
- When approaching a pawnbroker, firstly be sure that the pawnbroker is fully accredited and registered. The Consumer Credit Public Register lists everyone with an Office of Fair Trading licence.
One online pawnbroker that is relatively new is Borro.com.
Borro.com offers a fully insured online mail order pawn service that provides discreet and easy loans from the comfort of your own home.
With no shop premises to manage, Borro.com can charge lower interest rates than the high street pawnbrokers and lend up to much more.
The process is relatively simple and they promise to have the funds in your account the same day you accept the valuation offer.
There are also no early redemption fees, so if you want to repay the loan all in one go it won’t cost you anything.
They will provide short and quick loans on all items of value (with the exception of electrical goods) including,
- luxury cars (with a value of around £50,000).
Pawnbrokers make the majority of their profit through charging higher interest rates.
For example, Borro.com charge a monthly interest rate that varies between 2.99% and 6.99% depending on the asset and the value of the loan (you would normally expect to pay that for a whole year with normal loans).
This is the equivalent of a sizeable 68.8% APR.
Pay the loan back quickly, however, and pawnbroking – either online or offline at a pawbroking shop – can be a very effective way of generating immediate cash.
Hold on a minute – do you really need a loan??
It’s worth considering whether you actually need one at all.
For example, if you need an extra £1,000 to get that new car or build that housing extension (and don’t need these things as a matter of urgency) why not wait until you can afford it by making some extra money and putting it aside over a few months?
There are LOADS of ways to raise quick cash on the side.
- You may be able to rent out something you own,
- or make a surprising amount for just a few hours a week doing bar work.
- Plus there’s always boring old saving – and you can even save when you don’t have any money.
- Break the amount you’re trying to raise down into manageable targets that suit your circumstances. You could aim to save that £1,000 over a three month period, for instance, putting aside £333.33 each month.
You’ll be surprised at how much you could save and not need a loan.
get things for free
The other things to consider is that there are LOADS of ways to get things for free. You don’t necessarily need to spend ANYTHING right now.
- Need a sofa, fridge, bed, children’s clothes etc? Try Freecycle.org and Gumtree Free Stuff. People in your area are offering all kinds of things for free every day. Admittedly you will need to pick them up but that can be WAY cheaper than buying a new version. Go for second hand as much as you can. Many items are really good – the giver might just be tired of it or they’re moving house.
- If you find someone giving away a big item (sofa, bed, washing machine) and you need to pick it up, use Anyvan.com to find a really cheap man with a van to help you get it. That is WAY cheaper than buying a whole new product.
- Speaking of secondhand…it’s often WAY cheaper (and even better) to buy secondhand products at a fraction of the new price. Don’t bother with a new sofa – buy a secondhand one from Gumtree, Facebook Groups, Ebay or one of the other selling sites online. It’s tough to get a good price for secondhand furniture so haggle on the price and you should be able to get something good for WAY lower than the new price.
- Can you swap or barter for goods and services? Maybe with your friend or neighbour as something you need like an old computer, shelves or table. Offer to do their cleaning or babysitting for a certain amount of time to ‘pay’ for it. That can work very well.
if you possibly can, work to improve your credit rating. It will make it a LOT easier to get loans, credit cards, good mobile phone contracts etc in the future.
Of course, you know this. You wouldn’t be reading this if you didn’t!
There is no substitute if you are looking for a favourable interest rate. Find out how to improve your credit rating here. Most high street banks and building societies offer better interest rates over private loan companies and almost all will carry out a detailed credit check. It can take between six and twelve months to clean up a poor credit rating so if you start now it will make it easier to borrow further down the line.
Here’s another set of ideas on how to clean up a poor credit rating.
Sometimes you can be helped to get emergency money through debt charities. At the very least they can help you budget to free up some extra cash and speak to your current creditors to see if they might be able to extend you a bit more time to pay off current debts.
Try Community Money Advice. These guys are church-based and they do all the things that other debt advice charities do but they also stick with you throughout the whole debt-paying-off journey, which is hugely helpful. It means you have someone to hold your hand through the whole process.
Then of course there’s StepChange, National Debtline, Citizens’ Advice and Christians Against Poverty who all offer excellent, and free, debt advice and help with accessing extra funds where available.
Find out more about how to get help with debt problems in this article.