Credit crunch, sub-prime lending, bad credit loans UK, recession … some of the most widely used terms over the last few years or so. In simple terms the credit crunch is a crisis caused by banks being too frightened to lend money to each other or us. When they do lend they can charge higher interest rates to cover their risk.
So where does these leave those of us whose credit history is less than perfect? Maybe it’s the credit crunch that’s caused you a recent bad credit history or maybe it’s the reason you’re looking to re-mortgage or such-like but are funds still available and will the banks and financial institutions lend you the money?
The reality is that bad credit loans ARE still available and in varying type and size.
Secured Bad Credit Loans: If you own property with enough equity to act as security for your loan, and have sufficient regular income then a bad credit loan may not be too difficult to find. In fact these are very actively marketed as debt consolidation loans. Don’t forget that property prices have dropped and hence the finance company will be conservative in their estimations but once satisfied that they have significantly reduced their risk you should be able to find a willing and competitive lender. Use a broker to find you the best deal.
Security doesn’t necessarily mean your house – all the finance company is interested in is de-risking the loan therefore loans can be secured against other assets, an example being you car or vehicle. Such loans secured against your vehicle are known as logbook loans and are available from many, many different lenders. As long as your vehicle is free, or nearly free of finance and you are the legal owner you may be able to borrow from £500 up to £50,000 depending on the value of your vehicle but regardless of your status.
Car & Vehicle loans are still widely available as again these act in the same way as a secured loan using your newly purchased car as collateral.
Large unsecured bad credit loans UK: These are the ones that are getting tougher – the banks are looking to lend at minimum risk which they can’t do for someone with a bad credit history, large borrowing requirement and no security against the loan. If such a loan can therefore be sourced (and they are not impossible) it is likely that interest rates will be very high. Don’t make lots of different applications but talk to a specialist bad credit loans broker and put them to the test!
Small unsecured bad credit loans and short term bad credit loans are still available but interest rates may be higher : There are more and more different types and names of small loans specifically designed and marketed towards the bad credit market, for example:
Payday Loans : Small, high interest but short term loans available to those in employment and receiving a regular salary and who hold a UK bank account. Typically borrow £100 – £1000 and pay back next payday.
Cash doorstep loans or home collected credit: The old fashioned loan is making a comeback – a small, typically £50 – £500, loan delivered to your door and payments collected weekly or monthly.
Specialist bad credit lenders: many companies offering small loans specifically to the bad credit market – use a broker or go for reputable, well known companies but watch the interest rates and charges … some can be very high at the moment. Many offer instant decisions either by telephone or electronically.
If your credit history is really bad and you have no security then a guarantor loan is one possible option – loans, usually up to around £3000, but guaranteed by someone with security or who is credit worthy.
In a nut-shell then, bad credit loans ARE still available – the finance companies want to lend you money and, let’s face it, they NEED to lend you money to stay in business but they’re looking wherever possible to de-risk the loan by either lending smaller amounts, shorter terms and charging a higher interest rate for unsecured loans and looking for security for the larger loans but being more flexible as to what is acceptable as security.