Bad credit loans are specifically targeted loans for people with bad credit, but are they right for you?
Loans for people with bad credit
If you have had problems with credit in the past, or are currently experiencing financial difficulties, you may think that you won’t qualify for a personal or secured loan.
However, there are loans for bad credit available and here we highlight your choices and the issues you need to consider.
Reasons for needing a loan for bad credit
You may find that you need to apply for a bad credit loan if you have a low credit rating. This could have been the result of missing repayments such as for a credit card, phone contract or mortgage. You might also be a victim of having a non existent credit rating. In order to know if you are trustworthy the bank will want to see evidence that you will make all repayments on time, without a credit history this information isn’t available to them.
What is a secured loan?
It’s very important to be aware of the different types of loans for people with bad credit. There are both secured and unsecured loans. A secured loan means that the lender has a claim to your property if you cannot keep up with repayments.
There’s a chance that the interest rate will be lower for secured loans, however you need to think very carefully before taking one out. If you default on your payments you could risk losing your home.
Is a secured loan the best choice for people with bad credit?
If you are a homeowner and have a history of bad credit you are more likely to be offered a secured loan rather than a personal loan.
A secured loan does offer more choice as:
- the eligibility criteria are generally less rigorous than a personal loan
- the amount you can borrow is higher than a personal loan
- the repayment term can be longer
However, the lending company is only able to offer these benefits because its risk is reduced by having your house as security against the loan.
What steps can I take to improve my credit rating
- Debt consolidation loan. If you want to control your debt by having one manageable, monthly repayment, a debt consolidation loan could help you.
- Pay off your loans. If you are able to pay off the loan and accrue no further debt, this will be seen as a positive value towards your credit rating.
- Check your credit report. It is a good idea to check your credit report before you apply for a debt consolidation loan or secured loan.
- Credit Unions Banks and payday lenders aren’t the only places you can get a loan
- Guaranteed No Credit Check Cards Some cards may not require your credit to be examined
- How To Strengthen Your Credit Rating A good credit rating will determine whether you’re offered credit and at what rate