Don't forget that your credit history shows all the financial decisions you have taken so far, and it's no wonder that lenders will have a look at it and decide whether you can obtain a new loan or not. On the other side, not having any credit history is also a disadvantage - they can't estimate how you'll behave when repayments have to be made. Such a refusal for new credit may be due to County Court Judgments (CCJ) against them, arrears, or poor credit history. Discharged bankruptcy
, CCJs - these are the most difficult obstacles when you would like to obtain credit. These are closely followed by defaults - meaning that the lender ended the process of getting the amount back from the borrower.
can also cause difficulties with obtaining credit, mostly in case you would like to apply for a new mortgage or remortgage. Bad credit loans are the type of unsecured loans you can apply for even if you don't have a great credit history or you've been turned down for a loan before, and flexibility is one of their best features.
When somebody applies for a bad credit loan, their credit score will be checked in order to see whether they are eligible or not, and also to calculate the interest rate that can be offered for the bad credit loan.
Many people ask "How can I get my free credit score
online to monitor my credit report?" There are a number of websites to get your credit scores such as FreeScore making it very easy to check your credit ratings and start rebuilding your credit score.
The interest rates offered with a bad credit loan for people with less than stellar credit history are of course significantly higher than the ones appearing in advertisements of banks and building societies. This is because lenders of bad credit loans want to get a good return for offering credit to higher risk customers (those people believed to be at a greater risk of defaulting on their payments). Unfortunately, somebody with a poor credit record is seen as being a high risk customer for a loan, so even their bad credit loan will be more expensive.
The borrowed amount will influence the offered interest rate, so if you need a small amount the interest rate may be higher than in case of a larger sum - keep in mind that your personal circumstances will be taken into consideration as well. Of course, the recent turmoil in the financial markets is closely related to this type of lending. The crisis started at the level of sub-prime lending, where lenders gave out loans easily in order to enter the property market when individuals failed to repay the borrowed amount and their properties could be sold at auctions.
These loans were called “sub-prime” because they were lent to people with poor credit and (just as with bad credit loans) they had to pay higher interest rates because of the perceived higher defaulting risk. Of course when rates rose, many of these people were ultimately unable to repay their debt.
In most cases bad credit loans are offered by brokers who have the details of many loan plans, thus they can look for the lowest rate taking into consideration the personal circumstances of the borrower. Low interest rates are usually available for those with a better credit history, as they are more likely to repay the loan in time - in case of poor credit history the probability of meeting repayment deadlines is lower.
Bad credit lenders usually are not interested for what will you be using the borrowed amount for, so this way you can use it to consolidate other loans, or even buy a car. When contracting such a loan it is good to check whether the lender will apply early repayment charges or not, or have features like repayment holidays. Early repayment penalties may be as much as the equivalent of two months’ interest, so it pays the borrower to check the small print carefully before making any commitment.
Unless there are repayment penalties, it is almost always a good idea to pay of debts as soon as possible since the APR (annual percentage rate or interest) on any type of borrowing is likely to be substantially higher than the interest that will be paid on savings. Equally, those wanting bad credit loans would be well advised to shop around to find the best deals available to them. In the current financial situation, many lenders will be keen to get business (from all but the least reliable of borrowers) so perhaps now would be a good time for them to try out their bargaining skills!