Everybody's financial situation is different: some people live comfortably within their means, others sometimes struggle to make ends meet and yet more have to bounce from credit agreement to credit agreement in order to get through every month. While it might seem like only the lower end of the spectrum might be susceptible to it though, the truth is that anyone can fall foul of bad credit given the right (or, rather, wrong) circumstances. A few missed loan repayments here, the odd utility bill that slips under the radar and suddenly, your credit rating can drop to the point that getting credit further down the road isn't as easy as you might think. That isn't to say it does happen to everyone -- however, it's worth keeping in mind that the myth of bad credit only happening to the most financially irresponsible or insecure isn't true in the slightest.
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Thankfully, having a bad credit rating doesn't mean you're stranded as far as loan options go; indeed, as backwards as it may seem, taking out a loan might actually be the answer to improving your credit history. Known in the trade as Bad Credit Loans, a large number of independent lenders and loan providers have products designed specifically for people with poor credit ratings who've been turned away by the high street banks and building societies. The important thing to know, however, is which of these lenders are reputable and which aren't -- employing the services of a loan broker can help you distinguish which of the trustworthy licensed lenders are able to help, since there are so many companies out there claiming to offer the best rates.
Just as important is knowing which type of Bad Credit Loan you need. If it's only a little bit of cash you need to tide you over until your next pay packet, then you might want to consider a payday loan -- companies offering these specialise in short-term loans for small amounts of money, although they often come with interest rates that seem insane until you consider them in the context of the repayment term. More money, however, means you'd need to look at a longer term loan; these exist for bad credit holders too and have considerably lower interest rates than payday loans. However, the interest rates are still higher than more traditional loan products since the bad credit rating of the borrower presents more of a risk to the company lending out the money.
It's also worth noting in all Bad Credit Loan cases that the amount of money you'd be allowed to borrowed is likely to be hampered by your bad credit status. Since the bad credit mark is essentially a warning to lenders of your ability to handle your finances properly -- regardless of how it was earned -- they naturally take a more cautious approach towards anyone with bad credit approaching them for a loan. That isn't to say that they'll deal with you differently though; just that the maximum loan amount you'd be allowed is likely to be lower than regular high-street loans.
Of course, the best thing about Bad Credit Loans is that they can help repair your credit rating, to the point that you could consider getting credit with best rates of interest in the future. Granted, you need to keep up the repayments on a regular basis for that to happen (which may or may not be a problem, consider that may have been the very thing that earned you a bad credit rating in the first place) but providing you handle the loan responsibly, it can do you more good than just provide a bit of extra cash in the short-term. What's more, such loans have become increasingly easy to apply for these days, with many lenders and loan providers having online application forms that can be completed in just a few minutes and decisions often taking a matter of hours rather than days or weeks.
In Summary
Getting a loan with bad credit...
Isn't impossible to find if you approach the right lenders! Could range from shorter payday-style loans to longer term ones Will usually see you paying a higher rate of interest than more conventional loan products May cause you to have a restricted level of borrowing Can help to repair your credit rating through regular repayments Can be easy to apply for; online applications can often take just a few minutes
Copyright: Individual Finance, 2010
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