Obtaining Finance with a Bad Credit History

Finding finance with bad credit records can be difficult, but needn’t be impossible.  It’s certainly true that most of the major high street banks and building societies have a track record of refusing customers finance with bad credit rating — that’s because these lenders often have inflexible lending policies that don’t really take the individual customer’s unique circumstances into account.

Many lenders will not only consider lending to customers who’ve had credit problems in the past, but actively specialise in finance with bad credit history.

Where do I look?

If you have had serious debt problems that have affected your credit rating, you can pretty much forget calling into your local bank or building society and having your loan application accepted without difficulty.  Some lenders do offer appeals processes where an underwriter will personally consider your application, but for the most part the bank’s automated system will make a decision based on their credit scoring policies and, crucially, the results of an external credit check with one of the main credit reference agencies.

By going through an independent broker or financial adviser, or by using the Internet, you will greatly open up the range of lenders and loans available to you.  A quick online search will point you to any number of specialist lenders, brokers and comparison sites that focus on finance with bad credit histories.

Different types of credit available

Each form of finance has its own advantages and disadvantages, but you need to be prepared to be charged a higher rate of interest than you would if you had a perfect credit rating.

Short-term loans such as ‘payday’ loans and cash loans from ‘cheque cashing’ companies often charge a notoriously high APR (Annual Percentage Rate), however it’s important to balance this against the speed and convenience of the service they offer.  Often, these loans require no credit check, and loans can be immediately approved and the funds released the same day.

Unsecured loans repaid over a year or longer will usually charge a lower interest rate, but still higher than you might expect from a high street bank.  The terms and lending criteria for these loans can vary significantly — some may apply an up-front fee or application charge, others may require a family member or friend to act as a guarantor for the loan.

Secured loan options may also be available to you if you own your home (or have a mortgage).  Secured loan rates will be lower still, but this type of lending should be considered carefully — if you were to fall into financial difficulties again and were unable to meet your monthly repayments, it could result in your home being repossessed.

Credit card finance might be another option, depending on how much you need to borrow and how you intend to pay it back.  Many companies now offer ‘credit repair’ cards (usually with a high APR and low credit limit) that can help to rebuild and improve your credit profile.

As can be seen, finance with bad credit is available in a number of different forms, and by researching the market and taking advice you might just find the solution that’s right for you.