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Bad Credit Loans

Those who have had problems in keeping up with repayments in the past may feel like there is nowhere else to turn when it comes to obtaining credit. What is more, the more we apply for loans, the more damaged our credit score can become if we are refused credit over and over again.

It can seem unfair that we are judged for having financial difficulties, especially if it was something that was out of our control. As such, we can be looking for ways to repair our credit, without having to deal with a series of unsavoury companies promising a lot, and then simply charging you a series of fees with no loan ever materialising.

Although the term "bad credit" can seem somewhat judgemental, it is merely a way of making it clear as to what some finance companies offer. For example, those who have very little damage to the credit score are unlikely to use the services of a bad credit loan company, simply because they can find something catered to them from a number of providers.

Bad credit loans were created for people who may be struggling to obtain credit and are also searching for a way to improve their credit score. Of course, the cost of the loan can be more expensive than other loans, but it does offer those with a less-than-perfect credit score a solution to a vicious circle.

However, it is still important that you borrow responsibly and take some important factors into account before deciding to apply. As the last thing you want to do is take on more financial commitments if you are already struggling.

The Reasons for a Poor Credit Score

Although those who have been struggling with repayments will find that they have a poor credit score. There can actually be a number of reasons as to why an individual has a low credit score, and it is not always something they have done wrong. There can be a number of reasons as to why people struggle to get credit, and it is not always because they are not keeping up with repayments.

There are many people who have been self-sufficient for years and as such have never had to rely on a credit facility. It would be easy to assume that in this regard, there should be very little trouble in acquiring some form of credit, such as a credit card or a loan. However, you may be surprised to know that even if you have not been given credit in the past, this does not mean there will not be a problem moving forward.

Those who have never had to rely on credit will often have very little for lenders to base their decision on. As such will be unable to decipher as to whether there will be any problems in issuing credit. As you can imagine this can mean applying for any form of credit can be problematic for people in this predicament, despite having done nothing wrong.

It can be frustrating, as lenders who decline your application do not have to give a specific reason as to why, other than you have not met the lending criteria. However, some lenders will offer broad information where possible, which at least looks to offer some insight. Some of the more common reasons for a poor credit score can include the following:

  • Going Bankrupt
  • Mortgage in Arrears
  • Home Repossessed
  • Writs
  • Judgements
  • Defaults
  • Missed Payments
  • Constantly Changing Address
  • No Credit in the Past

It can be helpful to obtain a copy of your credit report. This will allow you to see what lenders see, as well as helping you decide on which route you should take when it comes to applying for credit.

As such, people have to look at ways to help build their credit history and may have to seek out a specialist broker or lender. Its easy to assume that this is very difficult, but the scenario occurs more often that you would think. In this regard, there are a number of providers who may be able to offer finance based on your particular circumstances.

How Do Bad Credit Loans Help Repair Our Credit?

Our credit score is based on a number of factors, one of the main factors is our ability to repay. If we are going through a period of difficulty when trying to make repayments, and the payments end up being late or missed altogether. This can cause problems with us acquiring credit moving forward.

In order to repair our credit score, we first need to find a loan that is adapted to our needs. Those lenders who deal with bad credit will operate in a slightly different way in many regards, as such providers still need to be responsible lenders.

However, once you have been accepted for a bad credit loan you can improve your credit score for the better. Each payment made on time will help boost your credit score, and give you access to more favourable rates in the future.

Applying for a Bad Credit Loan

As already pointed out, it is of the utmost importance that you are only applying for credit on the understanding you can afford to pay it back on time moving forward. If you are unable to do so, then you could find your credit score actually gets worse instead of better.

However, if you are in a position to make an application for a loan, then it can be worth checking that you have all the information to hand that can help support your application.

Explain Your Circumstances

Just because you may have had some problems in the past in relation to credit repayments, this does not mean that every lender will turn you away. However, it is more likely than they will require an explanation as to what happened, and how you will look to ensure this will not happen again moving forward. It could be that you have less debt now or you have just had a pay rise. Explaining all circumstances can only help strengthen your application.

Be Realistic Regarding Your Finances

When being offered credit, it can be tempting to borrow more than we actually need. It is important that we are able to keep our feet on the ground when it comes to make a credit agreement and be confident that we are able to keep up with the repayments.

This can be done by factoring in all your outgoings, against your current income. If you find things are a little tight, then it may be worth borrowing a smaller amount so it does not cause you any stress moving forward.

Research is Always Recommended

When people are desperate for a loan, it can be normal to peruse a number of websites offering a series of loans that seem too good to be true. However, not every lender is as ethical as others, and you may find that the company you use is only after a fee, and will do very little to actually finding you suitable credit.

This is why it is vital that you only deal with companies of good repute, who offer loans with transparent guidelines. Make no mistake, the interest on a bad credit loan may be higher than of a high-street alternative, but this is due to the associated risk. A reputable company should make you aware of this and even ensure that you are fully happy with any agreement, before the money is deposited into your account.

Overall

As you can see, there is no denying that a bad credit loan will cost you more than a high-street alternative, but it can be a very viable option if you are looking to repair your credit score. And just because a loan has a higher interest rate does not mean the rates will be extortionate, but they are something to consider when working as to whether you can afford to repay the balance.

There are still some things you can do to try and save some money, such as enquiring as to whether there is a reduction for paying the amount back early. It is also worth checking that all repayments will be reported to credit agencies, as if they are not taking out the loan may not have served your overall purpose.

Lastly, there is no need to feel ashamed when it comes to applying with bad credit. The name can seem very unappealing, but it is merely a different process that ensures all the bases are covered when offering people with a less-than-perfect credit score a solution that suits their needs.

Once you have built your credit score up by meeting the payment deadline, you will find that your credit score improves as a result. As your credit score improves, you will be able to search the market more thoroughly, and enjoy lower interest rates as a result.

For independent advice on loans please visit the Citizens Advice website. To get a credit report and a 30 day free trial please visit the Experian website.

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Just some of the UK Lenders we compare

1st Stop Loans Shawbrook Together Loans Evolution Money Fin-Sec Masthaven Paragon Finance RateSetter Spring Finance TFS Loans Zopa Loans Optimum Credit
SOME OF THE LENDERS LOGOS WHO WE WORK WITH (ARE NOT SPECIFIC TO YOUR PERSONAL CIRCUMSTANCES)

UNSECURED LOAN REPRESENTATIVE EXAMPLE - 49.9% APRC (variable) Secured loans from 3.83% APRC.

SECURED LOAN REPRESENTATIVE EXAMPLE - Assumed borrowing of £30,000 over 240 months, with a 36 month fixed rate followed by a variable rate plus a brokers fee of £1,495 and a lender fee of £495 would result in a monthly repayment of £256.04, the APRC 8.2% for 36 months then a monthly repayment of £247.45 on variable rate, the total amount payable would be £59,817.24. The actual rate available will depend on your circumstances, please ask for a personalised illustration.

By taking out a secured loan you are borrowing money that is secured against your home. If you are thinking of consolidating existing borrowing you should be aware that you may be extending the terms of the debt and increasing the total amount you repay. Rates as of 16/01/2017.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

WARNING: LATE REPAYMENT CAN CAUSE YOU SERIOUS MONEY PROBLEMS. FOR HELP, GO TO MONEYADVICESERVICE.CO.UK.

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