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Bad credit loans

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Unfortunately, we’re not all blessed with perfect credit ratings, which can cause issues when applying for loans and credit cards. This isn’t always a result of bad financial management and sometimes circumstances mean we’re unable to make the repayments. For those in this situation, there are a number of specialist lenders that are still prepared to provide loans.

The problem of bad credit

During the recession, many people found that they could not meet their financial commitments and this affected their credit rating. Issues can also arise for those who haven’t used credit in the past, as there is no payment history for a potential lender to check. Many of the major lenders are not willing to accept those with a poor credit history. However, there are lenders who can still provide access to the finances.

Before applying

Applying for any financial product is a major commitment. It’s important to consider all the areas before you apply, to ensure that the product is suitable for your requirements.

For many people there will be no other routes available to source the finances you require. This means that bad credit loans offer a distinct advantage, as they are willing to accept you when you wouldn’t meet the criteria for other providers.

By using one of these bad credit loans correctly and making repayments on time, you could actually change your credit status for the better. Taking out the loan and paying it off shows effective money management and means there will be a wider choice of lenders open to you next time you require credit.

One of the issues with these types of loans is that they generally have high interest rates attached to them. This is because customers pose a greater risk, so lenders need to charge more to cover the likelihood of you defaulting on the loan. There is the possibility that you could reduce the rate on any future loans by managing this account efficiently.

bad credit loans

Choosing a loan

Once you’ve assessed all the potential issues and advantages of taking out a bad credit loan, you need to choose the product that meets your requirements. It’s important that you do some careful research in other to find the best deal. There are a number of price comparison sites where you can search for bad credit loans and compare individual products.

These loans target a wide range of consumers and, as such, they each charge different fees and rates and have varying loan amounts. Some lenders will have lower rates for those who want to borrow more, so if you’re at the top of one payment band it might be worth borrowing a small additional amount to take advantage of the drop in interest rates. However, you should only ever borrow an amount you can afford the repayments for. Defaulting on this loan could cause further damage to your credit rating.

Secured or Insecured

You might be offered a choice of unsecured and secured loans. A secured loan will usually have a lower rate attached to it, but there is the risk your home could be repossessed if you don’t make your repayments on time. Whatever type of loan you apply for, make sure you consider the repayment period. A longer term will reduce the monthly amount, but increase the overall interest you have to pay.

As with any other financial product, you should think carefully before taking on credit. It’s important that you can afford the repayments and take into account the effect of any rise in interest rates if you’re on a variable deal.

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About Catherine Stern

About Catherine Stern

Catherine Stern is a freelance writer with a background in marketing and PR. She currently writes web content on a range of subjects, from finance and business to travel and home improvements. As a working single mum of two young boys she understands the pressures that today’s working parents face and the topics they want to read about.

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