Bad Credit Loans

You don’t have to be the perfect borrower to get a loan.

Bad credit loans, for those with a patchy or poor credit history, have become a part of the loan landscape over recent years.

While getting one may mean unexpected access to funds, bad credit loans are often far pricier than their conventional alternatives.

As a snapshot example at time of writing, a best-buy £7,500 loan for someone with good credit could get a 7.8% rate, which would cost around £1,580 in interest if paid over five years.

Someone with a poor credit history would have to pay 15.2% at best, or 30% as a typical figure. The former rate would set you back roughly £3,250 in interest using the same example. The latter would cost around a whopping £7,000.

Remember that the loan market can change rapidly so it’s likely different rates will be available when you apply, though the difference between the good credit and bad credit loan rates is typical much of the time.

Those examples are for an unsecured loan, for amounts up to £25,000 on a fixed interest rate, typically repayable for between three and ten years.

However, bad credit loans can also be available on secured loans. These are for homeowners only where your property is at risk if you fail to keep up payments.

These can be available for over £25,000 and can be repaid over anything from three years to 25 years.

Regardless of the type of bad credit loan you want, they are often limited in supply during economic downturns as lenders worry that the combination of a recession and a borrower with poor repayment history increases the chances of the consumer falling behind on payments.

Of course, if you qualify for a bad credit loan, you’d rather get a cheaper, standard loan.

To do this, you’ll need to improve your credit score which can often take at least a year, or longer if you’ve had serious problems and been declared bankrupt, for example.

Tips to improve your credit score include always repaying debts and bills on time; ensuring you are on the electoral roll; spacing out applications as too many in a short time can harm your rating and formally cancelling any unused credit cards (don’t just cut up the card).

If you are in debt, make sure you only borrow what you can afford as many borrowers get into a terrible debt crisis by over-stretching their finances.

If worried about debt, contact a debt charity such as Citizens Advice or the Consumer Credit Counselling Service.