24 May 2012
Do You Have Bad Credit But Need A Loan?
It is very easy to damage your credit rating simply by missing credit card and loan payments. There are thousands of people across the UK who have a bad credit history. Unfortunately, many people who need a loan will struggle to get the funding they want if they have anything less than a perfect credit rating and obtaining a loan through conventional lenders will be difficult. This is because the banks see you as high risk, and given the current economic climate it is a risk they are unwilling to take. However, there are options for people who have bad, little or no credit and have been refused elsewhere. You might want to think about taking out a bad credit loan which is especially designed for those with a poor credit history.
People take out bad credit loans because you can get one whatever your financial past, whether you have had a CCJ, default or IVA. Furthermore, they are suited to those looking to borrow more money for more time than the amount you can borrow with a payday loan. Another great aspect of a bad credit loan is that as long as you are responsible and adhere to the loan agreement and making your payments on time, these loans can be used to help improve your credit rating. This is because many of these loans come with a credit rebuilding facility. By rebuilding your credit rating this will stand you in a better position in the future when applying for financial products which will result in improved rates and loan conditions over time.
Like standard loans you can get secured or unsecured bad credit loans and there advantages and disadvantages of each. Secured loans are where you are required to put up an asset, used as collateral that is ‘secured’ against the loan. This is usually your car or home. With a secured loan because the lender has your asset as security there is less risk involved for them so you will often find you can borrow more money and will be given lower interest rates. However, there is more risk involved for the borrower because should you default on your payments then you risk having this asset seized. This means the worst case scenario is that your home could be repossessed. With an unsecured loan you do not have to put an asset up against the loan so there is less risk for the borrower but more for the lender and so you will find there are higher interest rates.
All loans come with an element of risk and are a big commitment. With bad credit loans you will find that the interest rates can be significantly higher than on other types of loans because the lenders consider you to be less likely to make your payments on time. As the interest rates are higher the risk of falling into debt is increased. You also risk damaging an already bad credit score which can put some people off. With this in mind you should only take out a loan once you have assessed your personal financial situation and can be sure that you will be able to make the monthly payments. Always be fully aware of what you are applying for and weigh up all the pros and cons before committing. Use comparison sites like Which Way To Pay to find some of the best bad credit loans on the market.