Are you fed up of being refused for a loan because of bad credit? Bad credit personal loans may be just the solution you need. We may be able to help! Read on with Personal Loans Now to learn more about how these loans work.
- What is bad credit and how it can happen
- Getting a loan with bad credit
- Benefits and drawbacks of a bad credit personal loan
- Alternatives to bad credit personal loans
- Door step lending and loan sharks
Being assessed as a bad credit risk can easily happen. Keeping up with all our financial commitments can be very challenging and before one is aware of it they can find themselves categorised as a bad credit risk. This may simply be due to a few missed payments or because they were unable to repay loans or credit cards due to a sudden change in circumstances. Moreover, those defaulting on secured loans, such as logbook loans online, may have had their property repossessed.
Getting a Personal Loan For Bad Credit
Being fully informed is the key to getting a loan if you do have a bad credit rating. A poor credit record may be the result of missed payments because you have lost your job. Similarly, you may have been ill and unable to pay all of your financial commitments for a short period of time. Circumstances like these can soon lower your credit score.
Having a poor credit rating can also be the result of never having borrowed money. This situation usually affects young people more than those adults with an established borrowing record. Whatever the reason behind the poor credit record there are usually still some options available for those who want to borrow. A bad credit personal loan from PLNOW may be just the solution you are looking for.
The Benefits and Drawbacks of Bad Credit Personal Loans
Drawbacks – Looking at the drawbacks of a bad credit personal loan, the biggest disadvantage is the high-interest rates. When you look around you may see unsecured personal loans advertised at a low representative APR (Annual Percentage Rate). It appears to be an excellent offer, but this advertised rate will not always apply to someone with bad credit. Cheap personal loans rates are generally offered more to people with better credit scores.
Benefits – One of the benefits of taking out a bad credit loan, if you can find one that you are confident you can comfortably repay, is that it can help to restore your credit rating to a better position. Taking out and servicing a loan allows potential future lenders to see that you can handle your financial commitments and are responsible enough to borrow.
A personal loan for bad credit might also be useful in consolidating a range of debts. This gives you the chance to make just one monthly payment instead of several. Ultimately this reduces the amount you have to pay each month. Even if you are a previously responsible borrower who now only recently has been downgraded to a bad credit score you will find it difficult to borrow from mainstream lenders. The lenders who specialise in offering loans for bad credit are taking a risk and this is why the interest rates are so high.
Alternatives to Personal Loans for Bad Credit
Looking at all the available options for credit will allow you to make an informed decision before you take up an offer for a bad credit personal loan. A first essential step is to get some advice about your current financial situation before committing to even greater amounts of debt. Organisations like the Citizens Advice Bureau and the Money Advice Service are staffed with helpful experts who will be able to advise you of the best financial route to take.
Individual Voluntary Arrangement
If you have a lot of debt then further borrowing is not always a good idea. It might be a better plan to look at making an Individual Voluntary Arrangement to get rid of the most pressing debts. If you decide to do this then you will not be eligible to borrow until the debts are cleared but the pressing letters and demands from creditors will stop. If the purchase you want to make is a one-off and you can get accepted by a credit card company then a 0% card might suit your needs for just one occasion. However, this is a very unlikely scenario if you do have a bad credit history.
Payday Loans For Bad Credit
In spite of what you may have read in the tabloids, payday loans are not all bad. This product is sometimes eminently suitable as long as you use an ethical lender and are fully aware of the amount you must repay. The government has recently cracked down on the rate of interest and fees that payday lenders can charge. However, this kind of borrowing is not really suitable for long term financial problems.
A Loan Application Rejection and Bad Credit
Applying for a loan and receiving a refusal is quite a knockback. But, it is not the end of the world. If you use this situation properly, it can help you to reassess your financial situation and start to repair your credit record. Taking out a credit card with a higher rate of interest and a low borrowing limit is one way that you can start learning about your credit score and repairing it. However, the most important point to remember about this is that you must pay off the balance in full every month.
So, small purchases that are paid for at the end of the month can help to repair a poor credit record. Learning how your credit rating is assessed can also help to restore your reputation as a good risk borrower. You can do this by checking out what information the credit record holds. Finding out the information is quite simple. All the UK credit reference agencies are obliged to send a summary of your credit record for the small fee of £2. Receiving the record will help you to understand exactly where you stand when it comes to borrowing.
Do Lenders Really Care about a Bad Credit Record?
One of the principle problems about a bad credit record is that it does not show the reasons behind the missed or late payments. Many lenders are now fully aware that a lot of people marked as a bad credit risk are in this situation due to factors beyond their control. A sudden change in circumstances will affect most people. Due to the poor economic climate, many families have little or no savings to rely on if they become unemployed or are off work due to illness.
Lenders will now consider applicants with a bad credit record if the situation is due to unavoidable reasons. One such reason might be an unexpected redundancy or a long illness. Once the situation has changed a borrower may reasonably expect to be able to have credit again but at the start, this can come at a cost. The terms of borrowing may be slightly more unfavourable than those offered to applicants considered to have good credit. This can result in a lower amount of borrowing on offer, a higher rate of interest or both. However, as long as you understand that this is because you present a higher risk it becomes clear that the lender is not acting unreasonably.
Beware of Bad Credit Loans from Doorstep Lenders and Loan Sharks
Someone who is classed as a bad credit risk may find it more difficult to borrow money. Sometimes they might feel forced into borrowing at high rates of interest by taking out payday loans or even using something called doorstep loans.
Doorstep Loans for Poor Credit
Doorstep loans are also known as home credit loans where the money is delivered directly to your door. Once a week the representative company agent comes round to collect the repayments. Doorstep lending was quite common before the advent of the Internet. Lenders were often not choosy about the state of someone’s credit record. Sums borrowed were typically quite small ranging from £100 to £500, but interest rates were and still are, very high.
Door step lending is not the same as using a loan shark to borrow money. Unlike loan sharks, door step lenders must be registered at the Office of Fair Trading. This registration does give protection for borrowers.
Typically, door step lenders operate in some of the poorest areas in the UK. They offer loans to customers with little or no credit history and to those who have become unemployed or suffer from ill-health – report in the Financial Times February 15, 2017
Borrowing Money from Loan Sharks
Borrowing money from loan sharks can be very dangerous. If you fall foul of these kinds of people by missing payments, at the very least you will be charged a lot more interest. At the worst, you could be threatened. In view of these kinds of reports, which appear to be on the increase, if you are desperately in need of borrowing money, it is best to get some free advice about debt before committing to any agreement. If at all possible avoid offers like ‘personal loans no credit check’ and a ‘bad credit personal loan direct lender’.
What Can I Conclude about Getting a Bad Credit Personal Loan?
Getting a bad credit score can happen to anyone. However don’t let yourself fall into the trap of doorstep lending and loan sharks. Remember, there are many alternatives to unsecured personal loans and payday loans for people with bad credit. If you do get refused because of your credit history, take this time to access your credit record and improve the situation. Personal Loans Now a fully authorised direct lender and credit broker offer bad credit personal loans. You can apply no matter what your credit score is.