What are bad credit loans?
They are basically loans for people who have a low credit rating (or a poor credit history),and in general, they are not available from the main high street lenders. There can be any number of reasons why you may have an adverse credit rating, you may have just left school and have no credit history, through to having been declared bankrupt.
There are a number of types of loan available including specialist loans such as those taken out by students to cover their time at university. However there are only two basic types of loan available to you if you have an adverse credit score, these are secured and unsecured.
A secured loan is mainly for home owners as the loan is secured against the home, or some other form of security such as a car or painting. This type of loan is relatively low risk for the lender as they have some protection against the borrower defaulting on the payments, and as such these loans tend to have lower interest rates.
An unsecured loan requires no pledge of collateral to obtain the loan, however, as it is much riskier for the lender the interest rates charged can be very much higher.
As previously stated if you do have a really poor credit rating you are unlikely to be accepted for a loan by the mainstream lenders, this is because the major criteria they use for assessing whether to agree to a loan is your credit rating. If you have been applying to the mainstream lenders then STOP right now, as every time you apply and get refused it adversely affects your credit rating.
Can you still get a loan?
Does this mean that if you have a bad credit rating you will never get a loan, not at all, there are plenty of companies who specialise in providing loans in this situation. These companies hardly ever look at your credit score and use a different set of criteria to assess whether to grant a loan or not. They are much more likely to want to see that you can afford to repay the loan and have the means to do so.
You maybe considering taking out one of these types of loans because you want to consolidate debts from credit and store cards and other loans. If you are finding difficulty meeting your monthly repayments to your creditors then a debt consolidation loan could be an option. You may be able to reduce your monthly repayments to less than the sum of your current debts but you will be paying for a lot longer. These loans also help to reduce the pressure you may be under from your existing creditors and leave you with just one creditor to deal with.
Before you find out how much this type will cost you, you’ll need to find out exactly how much you owe at present. Ask your creditors for settlement figures and not balances as the total must included any early redemption penalties (an amount charged by some creditors if you settle your debt before the initially agreed due date of the loan).
You must also ensure that you can comfortable afford the repayments, especially if the loan is secured against your home. A basic monthly income and expenditure review will also help to give you a clear picture of your financial situation. Don’t forget to include an amount for emergencies and unforeseen expenses.
In order to get the best deal on these types of loan; minimise the amount you need to borrow, come up with a list of 5 or 6 lenders (You most ensure that they are either “bad credit loans lenders” or “bad credit home equity” lenders. These are specialists lenders who know how to look past your credit score, focusing instead on other factors that determine your creditworthiness). Then shop aggressively between them.