Loans for People with Bad Credit Histories
If you need to borrow money and have experienced previous debt problems, it can be encouraging to learn that loans for people with bad credit histories are available from a number of lenders. A surprisingly high percentage of adults in the UK have had some form of credit problems, and this has only increased with the recent financial crisis and recession — with spiralling inflation, job cuts and the generally tougher financial climate, more and more people are finding difficulties in keeping up with their credit repayments.
Take professional advice
The best thing you can do if you are experiencing any form of difficulty with debt is to speak to an independent professional about your situation. This might be a registered debt charity such as the Consumer Credit Counselling Service (http://www.cccs.co.uk) , National Debtline (http://www.nationaldebtline.co.uk) , or your local Citizens’ Advice Bureau (http://www.citizensadvice.org.uk/).
The same principle applies if you have a bad credit history but now need to borrow money. You will find many brokers and advice services, either locally or online, who will have experience of arranging loans for people with bad credit histories.
Bad credit loans are specially designed for customers who have had debt problems in the past, and are often provided by specialist lenders, rather than high street banks and building societies. The application process may be more rigorous due to the higher ‘risk’ involved for the lender, but for some loans for people with bad credit instant decision on the same day might be available.
Consider the costs
As with all forms of borrowing, when considering loans for people with bad credit history it is important to consider all the costs that might be involved. Legally, every UK lender has to quote the Annual Percentage Rate (APR) for the loan, which allows you to easily compare loans from different providers.
You should be prepared for bad credit loan rates to be higher than an equivalent loan from a high street bank — and in some cases it will be significantly higher, especially if you are looking at short-term lending (such as so-called ‘pay day’ loans that usually have to be repaid within a month).
Some lenders may also charge an arrangement or other loan fee, normally paid up front, and it’s vital to take this into account alongside the interest rate itself. If you are specifically looking for loans without fees, be sure to search online using phrases such as ‘loans for people with bad credit no fees’, or ask your broker to ensure that he only considers loans with no fees that suit your circumstances.
Different types of bad credit loan
There are a number of different lending solutions available for people with bad credit histories. These include unsecured loans, which are broadly similar to a regular loan from a bank or building society, and secured loans which are secured against your property in the same way as a mortgage. If you have had debt difficulties in the past, it’s important to think very carefully before applying for further secured lending, as failing to meet your repayments could result in you losing your home.
Some loans may not require a credit check at all; however these will often be more expensive in terms of interest rate and fees. Other loans may need a third party (for example a family member) to act as guarantor. Due to the many types of different loans for people with bad credit histories, it’s always a good idea to do your homework and speak to a professional before committing yourself.
