Employed individuals, who are unable to make their ends meet due to higher gas and food prices and lower wages, can apply for these loans. Because prime-financing firms are reluctant to offer loans to high-risk borrowers, these sub-prime firms are tapping into this niche market. This is not to say that these lenders offer loans to one and all. These firms cater to borrowers who have good and steady income and a favourable and verifiable employment history. Employment history is only one such factor. Prudent lenders will also look at long term residency of the borrower. Besides, the borrower has to be a citizen of the UK residing in the country for more than one year. The borrower should also possess an active bank account, which should not be less than three to six months old.

Poor credit lenders offer both secured and unsecured loans. As obvious from the name itself, a secured loan is issued against a high-value collateral such as car, home etc. As the loan is secured, it naturally means that there is a lower amount of risk associated with it. For example, if the borrower has used his home as collateral the lender can always take possession of the property in case there is a default in payment. Given the lower level of risk associated with the loan, the rate of interest is also lower. Unsecured loans, on the other hand, attract a higher rate of interest and other associated fees.

Poor credit lenders not only gain from the high rate of interest they charge but they also make money from the sheer volume. Online lending companies can reach thousands of cash-strapped customers and make huge profits from miscellaneous fees for handling documents, title transfers, credit reports, faxes, and other administrative costs. Then of course, they gain from the high interest rates not to mention late fees and penalties.

The above discussion may seem to paint the poor credit lenders as people out there to make a fast buck at the cost of cash-strapped consumers. Well that may be partially true but if you look at the larger picture, it is more of a case of demand and supply forces at work. The consumers, if they use the loan amount judiciously, can greatly improve their creditworthiness. Without these sub-prime firms and lenders, the consumers with poor credit history would not get a second chance and this would in turn mean lesser money in circulation and consequently greater adverse impact on the economy.