What is a Bad Credit Loan

You may need Bad Credit Loans if you have had financial problems in the past. It can be frustrating. You may find that you do not have as many options available to you as someone with a good credit rating. You should be aware that having bad credit does not necessarily have to prevent you from getting a loan. But it may mean that you have to be more selective over the lender that you choose.  Read More >>

How Do People Get Bad Credit?

There are a number of reasons why people may have a poor credit rating. The most likely cause is because they have missed repayments on other loans. Or other forms of credit in the past. Unfortunately, credit reports that lenders use in their assessment of a loan application do not include any details of why these payments have been missed. This makes it hard for lenders to distinguish between people who have had genuine financial difficulties. And those who just have no intention to repay the money that they have borrowed.

What Loan Options Are There For People With Bad Credit?

There are loan providers that will make loans to people with bad credit. There are some things that you will want to be aware of if you are thinking of taking one of these loans out. It may be better to apply for a Payday Loan instead.

The first thing to be aware of is that you will probably be charged an interest rate that is fairly high. Unlike secured loans where the rates are much more favourable. This is because the companies are taking a chance on people who may not repay. Therefore they need to get as much money back as possible which the higher interest lets them do.

The collection methods of bad credit loans will also tend to differ from other types of loan. Payment may be taken as a regular payment from a debit card as this is more difficult for the customer to cancel than a direct debit. There are also companies who will make small cash loans to customers and collect the repayments in cash from a customers home. The theory behind this is that customers are more likely to pay. That is if they know that someone is going to be knocking on their door for the money.

What Are The Advantages Of Bad Credit Loans?

You may pay a little more for bad credit loans but they do come with some advantages. The biggest advantage is that they can help you to rebuild your credit rating. That is as long as the payments are made on time every month. It lets lenders see that even though you have had problems in the past. You are now much better at managing your money. You may then be able to apply for unsecured loans at better interest rates.

Bad credit loans also tend to be quite flexible when it comes to overpaying the loan. This is because the sooner they have the money back the better it is for them. However, this is also a big advantage for you because the quicker you are able to pay the loan back. And the less interest you will pay overall so always compare the loans on offer.

Applying and will I be accepted for Bad Credit Loans?

If you have never taken out any credit before then you also may find it difficult to be accepted for a loan. Lenders do not have a history to base their decision on and this can lead to the application being rejected. However, lenders that make bad credit loans are also more likely to lend to people with no credit history. Hence his can be the foot on the ladder that they need applying for car loans for instance.

If you have a poor credit rating and you have been struggling to get a loan. Then it may be worthwhile looking at some lenders that specialise in bad credit loans. One thing to be aware of though is that a lot of loan applications made in a short space of time could also negatively impact your credit history. Therefore, if you are turned down by one or two lenders. It may be a good idea to leave it for a month or two before applying again to another company.