> Poor Credit Loan - UK Guide
In a nutshell
A loan that can be taken out by people with a poor credit history.
Best Loan for
People with a poor credit history based on current or historical problems that find it hard to take out a standard loan.
The amount you can borrow will depend on a number of factors (it's possible to borrow anything from a few hundred pounds up to £100,000+). But this will depend on your lender, the type of poor credit loan you take out (i.e. unsecured or secured) and, in some cases, what you want the money for. Most lenders will look at your income and your credit rating before they will approve your application.
Typical loan periods for poor credit loans will again depend on the rules of your lender and the type of loan you choose. You can take out a poor credit loan for anything from 1 year to 25 years.
It's hard to get a standard loan if you have a history of poor credit or an impaired credit rating. Many lenders won't approve you and some will accept your application but will increase the interest rates you'll have to pay. A poor credit loan, however, is purely designed to help people with financial problems - so most anybody can take out this kind of loan as an alternative to standard credit. And, the chances are that you'll make some savings on interest rates.
What to look out for
Interest rates for poor credit loans will be higher than those given for standard loans. However, the rates you'll be charged will generally still be cheaper than those you could get from a standard lender. You need to be aware that you won't necessarily get the rates that a lender advertises for this type of loan - most lenders stagger their rates according to your credit rating - so the worse that is, the higher your rates will be. If you have credit problems already then taking out a poor credit loan can seem an ideal solution - but it can also cause further financial problems. For example, you need to make sure that you can afford your repayments every month - if you don't pay them then your credit rating will just get worse. And, your lender can take legal action against you to use you property/possessions to recoup their loan money. Payment protection insurance will give you some security - but this will add to the cost of both your monthly and total repayments. The fact that people with poor credit can find it harder to get a loan than other people can mean that they have to accept less than ideal terms and conditions. In an ideal world you should be looking for a loan that will let you repay early (if you can) with no penalties and it would be nice to have the option to overpay and to take repayment holidays. But, you may be forced to take out a loan that won't give these benefits which will prevent you from making the savings that you might make if you had some flexibility.
Some standard lenders will now give loans to people with poor credit so it might be worthwhile seeing if you have options there. Otherwise this is probably your best choice.