Guide to Bad Credit Loans
Bad Credit Loans? Type of Bad Credit Loans?| Bad Credit Loans | Top |
All of us who have ever borrowed money or had a credit card, will possess some kind of credit history. If we have religiously never missed a single repayment, always repaid repayments on time and certainly, never defaulted on a loan, then your credit history is whiter than white and therefore you are classed as a very good credit risk and lenders will be falling over themselves in the rush to lend you money. But we are not all like that. People’s credit history varies a lot, from the whitest of white to the blackest of black. Those of us, that have had the misfortune to have a less than white credit history due to circumstances such as defaulting on a loan, missed payments, or even having a County Court Judgment (CCJ) against us, you may also incur a bad credit history even if you have never applied for credit before (no credit history rather than a bad credit history).
Now, just because you have a bad credit history, does not necessarily mean that you cannot obtain credit from a lender, it just means you will have to pay more in interest than someone with a squeaky clean credit history. The other problem that you might come across with a bad credit history is that lenders will be reluctant to lend you a large amount of money.
It is worth remembering, that although your credit history plays a part in determining the terms and conditions of any loan you take out, it is not the only factor lenders take into consideration. They also look at salary, job stability and assets including property. All these go towards the lender accepting or rejecting your application for a loan.
Over the past few years, more and more lenders are offering terms to people with a bad credit history. Some lenders even specialize in this type of loan concentrating on lending to those people who seem a greater risk because of their poor credit history. Because these ‘specialist lenders’ make substandard loans, the financial regulators allow them to charge a higher interest rate than the regular lenders, such as those interest rates that high street banks charge.
Just how much more in interest charges you will have to pay, depends on your individual set of circumstances. The greater the risk you are perceived to be by the lender, the more interest you will pay and the greater the restrictions that will be placed on you. But in the majority of cases someone wants your business, and the moment your are granted a bad credit loan and start paying it back, is also the moment that you start repairing your credit history.
| Types of bad credit loan | Top |
There are two major types of bad credit loans:
- secured bad credit loans
- unsecured bad credit loans
As the name suggests, the loan is secured against some possession the borrower owns. In most cases, it is usually the equity in the borrower’s property, but a secured loan can also be secured by other possessions of the borrower, such as their car, jewelry, etc.
How much you can borrow with a bad credit loan depends on a number of things including your salary, your outgoings, your employment, and what security you are offering. This is most likely the avenue for people with a bad credit history to go down to acquire a loan, as it gives the lender greater security due to the value of the possession the borrower has secured the loan on.
With unsecured bad credit loans, the first problem a potential bad credit loan borrower will have is in actually finding a lender that offers one, and if he/she does find a lender offering an unsecured bad credit loan, it will in all probability, have a very high interest rate and shorter terms than those of a secured bad credit loan.
