> Bad Credit Loan - UK Guide
In a nutshell
A loan for consumers with a bad credit history.
Best Loan for
People with existing or past financial problems. A bad credit loan can suit anybody in this kind of situation who cannot raise finance via standard loan products
Typical borrowing amounts will vary widely here from a few hundred pounds up to £100,000+. The amount you can borrow will be different with every lender and will also depend on the type of loan you take out (i.e. secured or unsecured) and on what you want the money for. Also, your lender will probably base your borrowing assessment on your income and outgoings to assess what you can afford in repayments - which in itself may dictate how much you are allowed to borrow.
Typical loan periods for bad credit loans will again vary depending on the lender you choose and the type of loan you choose. Average loan periods start at 1 year and can go up to 25 years+.
If you have bad credit then you may find it difficult to be accepted for a standard loan deal. Or, if you are accepted, you will be expected to pay higher interest rates because you will appear as a risk to most lenders. This isn't an issue with a bad credit loan which is specifically designed to help people with bad credit problems raise loan finance. You are virtually guaranteed to have a loan application approved with this kind of product.
What to look out for
You will be charged extra in interest rates with a bad credit loan - although this specialist product should be charged at lower rates than those you would get from a standard lender that would accept your application. So, it's wise to shop around to see what kind of rates are on offer. You need to be aware that your interest rates may rise to even higher levels depending on how bad your credit rating actually is. You also need to be aware of the terms and conditions attached to your bad credit loan. If you can, make sure that they are as flexible as possible. You don't, for example, want to be paying extra redemption penalties if you ultimately find that you can repay your loan early. In this type of loan, it can also be useful to build in payment holidays to cover you for the odd month here and there where money might be particularly tight. If you already have a bad credit rating then you really do need to make sure that you can afford your repayments as comfortably as possible. If you take out a secured bad credit loan and then stop making your payments then your lender has every right to have your home repossessed to recover your money. Even an unsecured loan option will allow them to take legal action to get their money back. At the very least this will just make your credit rating even worse and cause you untold problems down the line. You can, however, take out payment protection insurance at the same time as your loan if you're worried about this.
You may prefer to try and find a standard lender that will accept your application - other than that, this is probably the best option for people with bad credit problems.