Bad Credit Personal Loans
Bad credit personal loans are a way people with an adverse credit history can still borrow money. You may have a bad credit rating if you have previously failed to keep up with payments on a credit agreement or have had County Court Judgements (CCJs) against you. You may also find it hard to borrow money with a normal loan if you do not have much of a credit history because you have never had any type of credit before, this is because lenders can’t see your history to judge if you are safe to lend to.
Bad credit personal loans
An unsecured loan is a personal loan not secured against any property. Personal loans may be difficult to get if you have a poor credit rating, however there are some available. You may find offers you do get have quite an expensive APR.
If you are a homeowner you may find it easier to get a 'secured' or homeowner loan with a bad credit rating, they also usually allow you to borrow a larger amount. This is because with this type of loan you put your home up as security on it. Because of this added security a lender may be able to offer this to people who have bad credit ratings.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. If you are at all unsure of the suitability of a particular product for your circumstances you should seek independent financial advice.
Another option for a bad credit loan is to use a guarantor loan. this means that instead of the lender consulting your credit history to decide if they will offer you a loan or not you can have a friend or family member agree to be your ‘guarantor’. The loan will instead rely on their credit history.
What you need to understand about a guarantor loan is that the guarantor also accepts responsibility for it. If the borrower misses a repayment date it becomes the guarantor’s responsibility to pay it. Failing to do so can have serious complications for both parties.
Before you take out a bad credit loan
You might want to think about alternatives to a bad credit loan before you commit to one. If you have any savings it could be better to use them instead. This is because the interest rates you might be earning on your savings may be lower than the interest would be charged on a loan.
It is also important to consider if you are thinking of taking out a loan to consolidate debt that spreading your payments over a longer term means you may ultimately be paying more overall than with your existing arrangements, even if the interest rate on this new loan is less than the rates you have at the moment.