- 24
- Nov
If you have an adverse credit rating you may well find it a struggle to get a loan.
Bad credit loans are products that are designed for people who have a bad credit history and find it difficult to borrow money.
People get a bad credit history when they have not been able to meet their repayments on debts such as a credit card bill, a personal loan, a current account overdraft or a mortgage. This tells lenders that they are a risky person to lend to because there is an increased chance the money won`t be paid back in full.
Access to credit therefore becomes much harder as the number of products diminishes, while the cost of the credit that is available comes at a higher price.
Some lenders provide loans specifically for people who have a bad credit rating but it`s likely that they will have higher annual interest rate charges than standard loans. To apply you will need to be over 18 years old and in employment.
Some companies need you to be a homeowner too and the loan will be secured against your property, however you should think very carefully about securing a debt against your home as it may be repossessed if you can`t keep up the payments.
To find a bad credit loan you can do an internet search to identify different providers. Fill in their online forms or calculators to get a quote or speak to an advisor, but always shop around for the best deal and read the small print.
Price comparison websites can do the hard research work for you. They often have sections for bad credit loans, alongside more standard financial products, so they are a good place to gather together a number of loans which you can easily compare.
Look for the APR rate, which stands for Annual Percentage Rate. This is the figure for the interest rate charges for a year. Basically the lower the APR the better – but always read and make sure you understand the conditions attached to the loan before you sign anything. Remember once you have signed up you have entered into a legally binding agreement.
Whatever product you take out make sure you understand the total amount you are paying back. You will probably pay back less if the loan is over a shorter term so try to avoid tying yourself up with long-term loans that will cost a lot more to repay.
With loans, like many product or service we buy, it can be difficult to work out if the loan company is genuine, trustworthy and reliable. With your financial situation already vulnerable you need to make sure that your bad credit loan is with an honest provider.
One thing to be instantly wary of is loan companies which ask for an upfront fee. In many cases you end up not getting your loan and in all likelihood the fee won`t be returned.
If you do decide to take out a loan for bad credit you can check with your local trading standards office or Citizens Advice Bureau if they can recommend, or warn against, certain companies so you can be reassured before you sign up that the loan provider has a good reputation.