Do you have bad credit? Have you been refused a loan before? There are generally always some options available for people with bad credit ratings as long as you are prepared to pay higher rates of interest in return for the loan. Some borrowers may even be required to provide collateral for a loan in return for the money. This could be in the form of a property, or even a car or vehicle. There are also other alternatives depending on the situation you are in. If you needed a loan fast as stop-gap until you received your wages, you might consider a payday loan.
Various loans for people with poor credit and payday loans come in two forms, Secured Loans and Unsecured loans. A secured loan is when you must put up an item as an insurance that you will pay off your loan. If your loan is not paid off then the lender will sell that item, take their money and give you the rest back. It may seem harsh but some lenders need to insure they will get their money back. If lenders didn’t do this then they would go out of business and they would not be able to lend money to anyone else. The other type of loan is an unsecured loan. This is the riskiest for the lender because they are just hoping you will pay the money back. This is why you would need a good credit rating to prove you could pay the money back.
A debt consolidation loan is a loan that you take out and it allows you to consolidate all of your debts into one. These debt consolidation loans can be very useful if you have run up your credit cards or you have taken out a number of loans which all have high interest rates and you are continuously skipping your monthly repayments. What the loan will enable you to do is roll all of your high interest debt that is causing you endless worry into one manageable payment. It will ensure you have an easier time making your payments; you will avoid late fees, extra charges and the bad credit that will inevitably result when you cannot afford to pay regular bills.
However for some people, debt consolidation might not be the right answer. A lot of the time the interest rates are very high. If the rate on your new consolidation loan is not any lower than the rates you are paying on your current loans then consolidating your debt would not make much sense. Moreover you should be aware that it can also take longer to pay off your debts if you get a debt consolidation loan. People often forget that when you consolidate your debt you still end up owing the same amount of money. The main difference is usually the length of time you have to pay it back, this could leave you paying more interest if the time period is really long.
As the economic climate worsens, lower wages and inflation can leave household finances under pressure so it is not a surprise that more and more people are seeking some sort of financial aid. The cost of living shows no sign of decreasing and the demand for loans is growing. However, as the UK tries to avoid falling into yet another recession, banks are becoming increasingly tough regarding whom they lend money to. Unfortunately, with the economic outlook continuing to look bleak, the banks are unlikely to lend much this year. With this in mind, what options are available for people who need a loan?
A loan can be a big commitment. Before taking out any loan you should seek independent financial advice as all loans involve a level of risk and everyone’s situation and requirements are different. Always be fully aware of what you are applying for and weigh up all the pros and cons before committing.
The interest rate is one of the most important things to think about when choosing a loan. The Annual Percentage Rate (APR) is the amount of interest you have to pay on the loan. When you take out a loan you have to repay the amount you borrowed plus this interest. Essentially, the lower the APR on the loan the cheaper it should be. The interest rate will vary depending upon how much you borrow and for how long. Unfortunately, the loans with the best interest rates will be given to people with the best credit ratings so the interest rate is often based on your credit score.
Before taking out a loan you should work out exactly how much you want to borrow and for how long. It also worth considering what sort of repayment options suit you. You should only borrow what you need even if you can borrow more than you want. The length of time you borrow for will affect how much you will pay each month. Essentially, the longer you have the loan for, the more interest you will pay but the monthly repayments may be reduced. A bad credit loan could be more expensive if you are paying it back over a longer period of time. With this in mind, you should try to borrow for the shortest period you can afford to keep costs down.
The best way to find a loan is to take the time to research different lenders; Research is the key to getting the right loan. There is a huge range of loan options so you should shop around to find the right loan that suits your needs. Online searches and comparisons can be really useful especially as some deals are available exclusively online. You should be aware of the full terms, conditions and features of different loans and make sure you know exactly what the interest rate is so that you know what you have to pay and when, which should help you budget effectively. Some other aspects to consider include whether the lender allows you to pay back your loan early if you need to and whether they offer a payment break but remember this can be costly.
Payday loans are an increasingly popular way of borrowing small amounts of cash, usually between £100-£1000. Unsecured short term loans work on the premise that you borrow a small amount of money which you will repay, plus interest, on your next payday. The application process can be completed online in a matter of minutes. They are popular because they are easy to get hold of. Obtaining a payday loan is a fast process with some lenders claiming to get money to you the sameday and others in as little as one hour.
Payday loans can be an important lifeline for those caught in a tight spot. You should only take out a payday loan for a short term emergency situation. For example, you might have received a bill that you can’t afford to pay or your boiler suddenly breaks and you need to pay for an urgent repair. If you need to pay for something and you cannot wait until your paycheque comes through then payday loans can be used in certain circumstances. Sometimes, they can even work out cheaper than overdraft charges or going over your credit limit but this is not always the case. Bear in mind that you could damage your credit score which can affect you in the future when applying for financial products.
One of the reasons payday loans are so popular is that they are accessible to most people. Payday loans usually impose minimal credit checks and in most instances you can get one whatever your financial history. The minimum requirements are often that you are over 18, have a current account, debit card and a regular income. If you have been refused elsewhere, have outstanding debts or are a first time borrower you can still acquire a payday loan. However, because payday loans are so easy to get hold of the interest on them is very high and this makes them more risky especially for those who are already in debt.
The payday loans industry has been heavily criticised as lenders have been blamed for escalating people’s debt problems. The interest rates or APR on payday loans are very high because there is more risk involved for the lender as they are unsecured loans and many will approve customers regardless of their credit history. Do bear in mind however, that payday loans are only designed for short term borrowing. When you take out a payday loan if you fail to repay what you owe plus the interest, the debt can be rolled over to the next month but you could end up paying interest for both months. Each month that you miss repayments you could keep paying the interest making the loan very expensive very fast. This could in turn spiral into a serious debt problem.
Many people are unaware of how important having a good credit rating can be. A good credit rating is a useful asset that will stand in your favour whenever you apply for a loan or credit card. You can easily tarnish your credit report by missing payments. Unfortunately, no matter how financially secure you are, recession can change conditions very quickly. For example, you could lose your job and therefore fall behind on your monthly bills which could damage your credit score. As someone with bad credit you are considered to be more of a risk to loan lenders so you will have struggled to get approved by the banks.
If you have bad credit you can get a bad credit loan. These loans are especially designed for those who have been refused loans because of a poor credit rating. With a bad credit loan you can borrow more money for more time than with a payday loan; they have more flexible terms. Many of these loans can also be used to rebuild or improve your credit score.
Although you can still get a bad credit loan regardless of your financial past, the exact amount you can borrow can be affected. Please remember that if you do not repay the loan you could end up worsening an already low score. You should also expect interest rates to be higher because as someone with a poor credit rating you are considered to be more of a risk
Bad credit loans are often secured loans which means that you have to put up a large asset such as your home (used as collateral) against the loan. While this should help lower interest rates compared with unsecured payday loans, this means that should you default on your repayments you do risk having your home seized. However, not all bad credit loans are secured loans.
One of the steps you can take to overcome your debts and eventually improve your credit rating is by taking out a debt consolidation loan. Consolidation loans are ideal for those who are struggling to juggle multiple debts. These loans consolidate all your debts into one manageable monthly payment that is hopefully lower than what you are already paying. The idea is that consolidation loans should work out cheaper than the combined debt would over the long term. Ultimately, you are moving all your existing debt into one place. This will help you budget your expenses more effectively as you will know exactly how much your debt will cost each month and exactly when the payment will go out each month. Consolidation loans can help make your repayments more straightforward and is a good way of organising your finances.
Remember that with a consolidation loan it will be easier to pay back your debt but it will not reduce what you owe. Furthermore, although sometimes the interest rate on a consolidation loan works out lower than continuing to deal with multiple debts this is not always the case. Some people may also not be comfortable in taking out another loan on top of what they already owe because you risk getting into more debt. If you are already in debt you do risk ending up in further debt if you cannot meet the loan agreement so you might want to consider alternative options.