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How Do Bad Credit Loans Work?
What exactly is a bad credit loan?
A bad credit loan is a loan designed specially to help people with a poor credit history get the finance they need.
The majority of bad credit loans are secured personal loans, which means the loan amount you borrow is secured upon your property.
A secured loan uses the equity in your property to determine how much you can borrow, and because there is less risk for lenders, secured loans often allow you to borrow larger sums of money even if you have a poor credit history.
There are also bad credit loans specifically designed for purchasing a car. Bad credit car loans do not require you to be a homeowner to take the loan out.
How much can I borrow with a bad credit loan?
Because the majority of bad credit loans are secured personal loans, the amount of money you can borrow will be dependent upon how much you can afford to repay each month and how much equity is available in your property.
The equity in your property is it's current market value minus any outstanding mortgage or other loan secured upon it.
However, even if you have little or no equity in your property, bad credit loans can often lend you up to 125% of your property's value (minus your mortgage and any other secured loan).
When working out how much you can borrow with a bad credit loan it is also important to know how much you can afford to repay.
Secured bad credit loans will often allow you to spread your loan repayments over a period of up to 25 years, making them an affordable option for larger loan amounts.
Find out how much your bad credit loan repayments will be with our loan calculator. You will need to enter how much you would like to borrow, over how many years you would like your loan term to be. You will also need to enter an interest rate for the calculation - you can find the typical APR's of each loan lender in our bad credit loan comparison table. Remember though, the typical APR is the rate most people are offered (over two-thirds), but it may be higher or lower depending upon your personal circumstances.
Who can a bad credit loan help?
Bad credit loans can help people with a range of different financial circumstances get the finance they need for a range of purposes.
A poor credit history can be due to late credit repayments, mortgage arrears or defaults and County Court Judgements for non-payment of debt.
A bad credit loan can help with any of these credit problems.
How do I know if I have a bad credit rating?
If you know yourself to have a poor credit history generally this means you will subsequently have a bad credit rating.
There are many services offering free online credit reports that allow you to see exactly what banks and building societies see about you when you apply for credit with them.
Knowing what's on your credit record can help you when looking for finance options, like loans.
Credit Expert from Experian offer you the ability to view your Experian credit report online for free, and you'll also get a 30-day free trial of CreditExpert's services. Visit CreditExpert.co.uk .
If you do have a poor credit history and a bad credit rating, it's advisable to apply for a loan with a lender or broker who specialises in helping people with a poor credit history.
Otherwise, the loans you apply for are likely to turn down your application, which may further damage your credit score.
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