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Bad credit loans FAQ

With gas and food prices at an all time high people are finding it difficult to make ends meet and on top of that if they are saddled with an unexpected bills the situation can become all the more grim. Add to the woes a poor credit score and things could not seem to get worse. But as the saying goes there is always a way out and the same holds true for the cash-strapped consumers --- people with poor credit history can now fulfill their short-term cash needs and also preserve their long-term financial heath through bad credit loans.

What are bad credit loans?

Bad credit loans are a type of personal loans offered to people with unfavourable credit history. The lenders will not ask for your credit score; however if you have a good score, you can negotiate for lower interest rates.

What are the different types of loans available in the market?

As a borrower you can avail of secured loans and unsecured loans. Secured loans are offered against collaterals. For example, you can use the equity in your present vehicle to finance a new car. As the loan is secured, you can get the loan at a lower rate of interest. This is because there is a lower risk involved in case of non-payment of dues; the lender can take possession of your car if you are unable to pay your installments. Unsecured loans, given their very nature, attract a higher rate of interest. Though you can avail of both these types of loans even with an adverse credit history, keep in mind that a good credit history will help you secure the loan at a lower rate. You will be able to find loan products at many high street banks available alongside their current accounts.

Can a bad credit loan help you improve your credit score?

The answer to this is yes, a short term loan can help your situation. This is because you can use the loan to make re-payment of your existing loan. This will have a favourable impact on your credit score. But when you take a bad credit loan, keep in mind your current income and expenditure and ensure that you have sufficient funds in hand to repay the bad credit loan.

Do these loans have a higher rate of interest associated with them?

Yes on the face of it, they definitely come with a higher rate of interest but then if you take into consideration the fact that these loans are to be paid off in a shorter period of time, you will benefit over the long run. Suppose you take a low-rate of interest loan payable over a long period. Calculate the rate of interest that you would be paying over let us say, twenty years, you will find that you are actually paying more in terms of interest over a long period than what you are paying over a short period. Once you are back on your feet financially, you could always make interest payments work for you by investing in a SIPP.

What if I am a business Owner ?

If you own or operate a business, or are classed as a sole trader. You can persue commercial banking options, of which there are many in the UK.