Many people have had a tough time financially over recent years and this has increased the amount of payments which have been missed and defaults which have occurred. Whilst this may have only been a temporary blip, with a mark on the credit record and with banks still operating very cautious lend policies it can be very difficult for those with a less than perfect credit history to obtain a loan.
Therefore for those looking for a loan the choice of lenders will generally be restricted to those providing finance in the specialist market of bad credit.
A new loan can actually help to repair a credit record – providing repayments are made without fail -but in order to get the loan in the first place it is important to understand who is likely to accept the application. Having multiple credit searches done within a short period of time is seen as an indicator that there are financial problems and reduces the chance of a loan being approved. Before applying it is therefore imperative to know exactly what is on the credit file and whether the history would be viewed by a lender as bad or very poor. Even if the credit history is very poor there is still a chance to obtain credit but it is important to approach the right lender.
Loan rates vary wildly in the bad credit market more than for a typical high street loan so it is important to shop around to look for a match between your circumstances and the best rate available. Having a poor credit record does not mean interest rates should be extortionate – this can be a sign that the company is one to be avoided as the debt will take a ridiculous amount of time to pay off, meaning no other credit can be obtained in the meantime.
Before deciding who to apply to, it is possible for companies to give you an idea of price and acceptance without leaving a footprint on your credit file – this is known as a soft search and can help maximise chances of acceptance at the best rate possible before making a full application.
There are far more choices for homeowners who have equity in their property and lenders will feel happier providing money with security to those with a bad credit record. For those looking to purchase a car or a motorbike it is also easier to obtain finance secured on the vehicle, as well as often working out cheaper too. The downside to both of these types of loans is that is payment is defaulted on for any reason, either the property or the vehicle will be put at risk.
However, tenants or those with insufficient equity in their homes can also find credit in the market with an unsecured loan. There are mainly two types available – guarantor loans and those which require a credit check. Guarantor loans are available to more or less anyone and rely more on the history of the guarantor than that of the applicant. Guarantors are generally required to have their own property and a reasonable credit history. Those without a guarantor or not wanting to go down that route are still available but will generally be far more expensive.
Doorstep and payday loans are two options which have risen in popularity over recent times and are accessible to more or less everyone to some degree. However, the interest rates charged are excessive and whilst most firms are genuine, they are best avoided if at all possible.
Those with a bad credit history may be tempted by offers of a guaranteed loan for bad credit in return for a fixed sum upfront. These should be regarded with extreme caution as the number of applicants matched with lenders tends to be minimal and there has been a lot of publicity recently around the reticence of brokers in returning the fees for unsuccessful applicants.