Looking to borrow money with bad credit, but not getting any joy? Financial institutions use a process known as credit scoring to assess the risk of lending you money. Applicants with a poor credit history have a far higher incidence of default. Past defaults, delinquencies and bankruptcies lead to immediate rejection. Despite being rejected by the banks, there are alternative unsecured bad credit loan providers who may be prepared to lend you money.

Advantages of Unsecured Bad Credit Loans

  • Guaranteed acceptance. Provided that you have a full-time job, you can still get a bad credit cash advance. A payday cash loan involves no credit checks at any stage of the application process so people with past credit problems are not automatically ruled out.
  • Emergency situation. Should an emergency situation arise, such as fixing the car, it's easy to borrow money. Ohad Hessel, marketing manager for Payday Bank, stated that: "We are often the only source of lending for those refused credit and in need of emergency financial help."
  • Any-purpose loan. Unlike the banks, lenders never ask what the money is going to be used for. It's possible to borrow money with bad credit for absolutely any purpose.
  • Speed. Once a basic set of eligibility criteria have been satisfied, the money will be sent to your checking account within a maximum of 24-hours.
  • Minimal paperwork. Administration is minimal and is normally completed by the lender.

Disadvantages of Unsecured Bad Credit Loans

  • Cost of borrowing. Due to the risk of default, most loans for people with bad credit are expensive. It costs $20 to $25 to borrow $100 for 30-days. However, a recent Office of Fair Trading (OFT) report voted against capping interest rates and favored improving industry competition.
  • Lending terms. There are concerns about the transparency of information provided by payday lenders. Sharon Flaherty, editor at Confused.com (a leading price comparison site), said that: "Most of the payday loan firms we investigated didn't display the penalties charged if people miss payments or want to extend their loan. In one case our researcher was told that details would only be available once they had registered and applied for the loan."
  • Cycle of dependency. High borrowing costs mean that customers have less money to pay their bills the month after. This often leads to an application for yet another unsecured bad credit loan. Lenders make the bulk of their profit from repeat business.
  • Debt. Guaranteed bad credit loans are often taken out by people who aren't good at managing their personal finances. A series of impulse buys could exacerbate personal debt problems. Borrowing money with bad credit is only advisable when there is a way to repay it.

Pros and Cons of Guaranteed Bad Credit Loans

Unless able to provide collateral, most financial institutions do not offer loans for people with bad credit. A payday lender is prepared to help when all of the banks have rejected your application. The money will reach your account really quickly, often within 24 hours.