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Are Bad Credit Loans With A Direct Lender The Best Option? 

Many people seeking bad credit loans want to go direct to a lender, but why? The thing is most direct lenders need to conduct a hard search when dealing with bad credit loans.

The reason for this boils down to a few contributing factors. Below, we explain some of these reasons in detail to give you a much better understanding of the process from start to finish. 

Managing Your Finances While Having Bad Credit

Have you ever found yourself standing in a shop, looking to buy something you need, and as soon as you try to check out, your credit cards maxed out? 

Or are you in a situation where you have been ignoring your bills, and they’re catching up on you? Then when you look to borrow, lenders either ask too many questions or simply refuse you access loans. 

Well if you are unaware this might seem odd to you. The thing is these examples affect your credit score adversely.  Checking your credit score should be the first plan of action!

Before we get into our main topic here, having a background knowledge is extremely crucial. You need to understand the core fundamentals to then dive into your best suited funding options. So, let us get on with it!  

Bad Credit Loans And A Direct Lender Whats your best option

What Are Bad Credit Loans?

Bad credit loans come into play when a person has failed to pay his/her debts. Usually, they fail to make necessary payments to a lender, which ends up earning them a negative credit score.  

It indicates that the credit history of such an individual is bad or poor and he/she comes under the category of a potential defaulter. 

We need to note here that bad credit is not the same as bad debt. Bad debt underlines the inability of an individual or a company being able to pay a lender back the loan owed.  

What Is A Credit Score and What Does It Indicate?

A credit score is a rating that is given by the credit rating agency or a financial institution. This is based on the customers ability to pay back a certain debt. 

If timely payments have been issued, this usually means that you’ll have a good credit rating or history. This shows that you manage your debts and expenses well, giving you that excellent or good score.  

On the other hand, if you have a low score or a bad score, it means that you have a very poor history of meeting your debt obligations. In simple words, it means that you have not cleared bills or installments on time. 

A credit score usually ranges from between 300 – 850. A score of 700 or 700 plus is considered to be excellent. A score of between 650 till 700 is considered to be good. 600 till 650 to be fair, from 300 – 600 to be poor, and lastly, 300 below to be bad.

The table below summarizes the scores. 

Credit Rating  Credit Score Range  
Excellent 700+ 
Good 650-700 
Fair 600-650 
Poor  300-600 
Bad 300 and below 

What does it all mean for bad credit loans and a direct lender?

Ratings and a credit scores give the lending company an idea whether to lend to the applicant. This will show them the financial security they expect or not based on your credit rating history.  

For example, a person who doesn’t pay their dues to their credit card company will score less than a person who pays on time. Based on this information, a lender may deny any credit or a loan application. This could apply to individuals or even companies that have a bad history. 

However, if they do decide to lend to that particular individual, then certain conditions might be set in places such as high-interest rates, large initial deposit, or collateral. It is safe to say that these lenders will regard you as a high risk.  

On the other hand, if you have a good credit history, lenders normally won’t hesitate to lend you money. Hence, it is very important that you manage your expenses and clear your dues on time to avoid unnecessary trouble. 

Now that you have a basic knowledge about how these things work let us dive in further. 

Check your rating before applying for a bad credit loan with a direct lender

Pre-qualification with direct lenders

Whenever you apply for any type of credit or loan facility, the lender or the credit rating agency runs two types of check inquiries in order to generate a credit report. 

  1. Hard inquiry 
  2. Soft inquiry 

A hard inquiry is the one where the lender goes through your file after you apply for credit or loans. This changes your credit score whether it’s either for the good or the bad.  

A soft inquiry is the one that happens when you apply through a broker, and this review doesn’t impact your credit scores at all. 

Once you have established your bad credit rating position (in this article, we will use the point of view of bad credit), you will then look into your funding options. Funding options largely depend on affordability, tenure and the amount. For such individuals that seek bad credit loans it’s wise to be aware of this.  

What are bad credit loans with a direct lender?

Bad credit loans with a direct lender are intended for people who have a history of bad credit rating. They are unsecured, personal and also used for small amounts. Most direct lenders usually deal with amounts from £100 to £3000 as it’s less risk.

They are vary rarely available at any high street banks or online banks. You have to search for such direct lenders, loan brokers, or agencies that deal with these kinds of loans. 

Something to note. Applying with a direct lender that doesn’t deal with bad credit loans will still have an impact on your score. So, it’s always a good move to carry out some research.

What are direct lenders?

A direct lender is a financial institution which decides whether you are suitable for a loan or not after going through your credit rating report. If they find it satisfactory, they’ll pay a loan directly to the individual needing one. Essentially, they lend their own money, like a bank would. 

There are different types of lenders, which can include high street and online customer platforms. 

However, it may be time-consuming considering the amount of effort one has to put in before qualifying for a loan. Especially if one lacks the relevant knowledge and information about who to approach, who to avoid and who is the best person to deal with. If for relevant reasons, one lender refuses, then you have to start the whole process again with another lender.

Be mindful that jumping from lender to lender can turn into a negative domino effect on your credit rating.

If your lender agrees to the loan, they will hand over your funds quickly and directly to you, thus making it a speedy process. However, as advised above – if your loan process is approached in the wrong way it could result in an expensive lesson.  

What Is A Loan Broker?

Loan brokers are well known in a few areas of finance. For instance, mortgage brokers, secured loan brokers and personal loan brokers. Brokers basically provide an alternative for customers to use, rather than using the option of a direct lender. A loan broker is an entity that connects the individual to various lenders based on the customers information they have given.

In a nutshell, they serve as guiding personnel to the customer and borrower.  

The necessary information they take from a bad credit risk individual goes through their pool of lenders and generate a quote from which sends this information back to the individual/borrower so that they can decide which lender to go with. 

Once the individual decides this a broker connects them to that lender acting as an intermediary. Meaning they take care of introduction to start the lending process. Usually all the customers necessary pre-approval information is collected beforehand and the official paperwork and loan documentation is sent by the lender. Think of it that they act as an agent to the borrowers and lenders.  

What Do They Charge?

They earn money by charging a minimal fee from the lending party, and it is up to the discretion of the lender as to what this expense is. They normally offer a quick and slick system, most people prefer using a broker rather than a lender because they do the hard work for the customer. The reason for this is they have a vast knowledge and experience in handling such applications, and have a huge networking base of potential lenders.

Most personal loan brokers cost nothing to the customer and can search more lenders in seconds than the customer has time for in a week. 

Along with this, using a broker instead of going to a number of lenders means you’re dealing with one company. Thus, making it easier to determine the kind of loan you may or may not qualify for.

It is very important to note here that a lot of lenders work very closely with these brokers. All the work that they do is closely monitored, and many regulations are set in place to avoid fraudulent activity.

should you choose a bad credit loan with a direct lender or broker

A Bad Credit Loan With A Direct Lender or Loan Broker?

After understanding the concepts and the job description of them both, it is safe to say that one might suit you better than the other. So, how will you select the best option? It is simple! 

You might have a very cordial relationship with a particular lender e.g. a bank you’re already banking with. Thus meaning, you’d rather stick to what you know so there’s no need for the involvement of a 3rd party or middleman. So a direct lender is most probably your best option.  

However, if you don’t want the trouble of contacting various lenders. Also, dealing with the application process and paperwork by yourself, and are keen on dealing with only one company throughout the whole ordeal, then using a broker could be your best option.

As is a broker i suppose we are bias towards brokering options. Whether it’s a mortgage a car or even a watch, using a broker can save you a fair bit of time and most importantly money.

Other Lending Options:

As regards to a loan you should always choose the offer which gives you the best possible rates. This one can be a bit tricky and time-consuming, but it always pays dividends. What you could always do is approach both companies and get a quotation for your circumstances. Then, you can compare the rates and select the one which is best for you to go with.  

On the other hand, if you still can’t decide on whether to go for a bad credit loan with a direct lender or a loan broker, then you can opt for other options.

For example, credit card companies now offer cards specifically designed to assist bad credit, or even with no credit history.  

Peer-To-Peer Lending Networks

This network, just like a loan broker, also serves as an intermediary between lenders and individuals. The only difference is that they cater to the needs of the entrepreneurial approach rather than personal. Hence, their lenders are investors rather than consumer finance companies.  

This network is also known as P2P lending. It connects the borrowers to different levels of risk.  

Secured Personal Loans

This loan involves having collateral such as a car, house, personal property to secure short-term or long-term loans.  

Guarantor Personal Loans

This type of loan makes sure that the debt is covered. It is done by lenders allowing the individuals/borrowers to take out a personal loan, which is guaranteed by an individual close to the borrower. It could either be a family member, a colleague, a friend, or a partner. If the borrower fails to pay back the debt, the guarantor is obligated to cover the cost.  

Payday Loans And Bad Credit

Bad credit payday loans are based on small amount of borrowing and need to be dealt with carefully. These lenders are usually less keen to know your credit rating and may focus more on your current financial condition. It is supposed to be paid back when you get your wage from work. If you fail to clear your payday debts on time, there can be a heavy financial penalty which you would have to bear. Thus, it might worsen your credit rating even further.  

Borrowing from Family Or Friends

If you have a closely-knit family or a group of trustworthy friends, then it might be in your best interest to borrow from them. This would be an easy option to take if they’re willing to lend you the money. You might be able to get away with little interest or none which could really ease your financial troubles.  


Although lending and borrowing is known to be big business, it is best that one aims to try and avoid having a bad credit rating. And if for some reason, you do end up having a high or bad credit score, it is better that you try to find ways to eliminate or reduce those risks associated with having one.  

Funding and financing are amazing tools we have available, but if used rashly or irresponsibly or even exploited, it can prove to be severely problematic for you or your business. 

Representative APR: 279.5% | Representative Example: Loan Amount: £300 | Borrowed for 60 days | Total Repayment: £420.82 in 2 monthly installments of £210.41 | Interest Charged: £120.82, interest rate 120.8% pa (Variable).

Our website is completely free for you to use, but we may receive a commission or fee from some of the companies we feature or introduce you too. is a registered Trading Name of RJW Assist LTD. RJW Assist LTD is registered in England and Wales (Company number: 09470548). Registered Address: Brook House, 40 Cuthbert Road, Stockport, Manchester, SK8 2DT. Licenced by the Information Commissioners Office: registration number: ZA436430. RJW Assist LTD is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register under the reference number: 788094. We are a licenced credit broker, not a lender. does not provide any loan or consumer credit products directly.

Timescales on receiving your funds may vary from lender to lender and depends if your bank accepts faster payments. The loan amount and interest rate offered is subject to the lender’s requirements and approval.

Warning: Late repayment can cause serious money problems. For help, visit