Obtaining a loan or any type of finance can be a real challenge. If you have a bad credit history and you are trying to get a secured loan or buy a house, you will usually have to do even more work to find a lender that will be prepared to lend you the money. You will also have to pay a higher interest rate than someone with a clean credit history.
What Is Credit History?
Before you go looking for loan, it is crucial that you know more about your credit record. This is a recording of all your past financial commitments and contains information about your repayment reliability and the total amount of debt you are carrying.
Lenders look at this record to determine your credit worthiness, usually by assigning you a credit score. The lower your credit score the less likely a lender is to grant you a loan.
How Did Your Credit History Go Bad?
Your credit history is an ongoing record of information about you and your finances, so anytime you miss a payment it is captured in the file. This is the same if you have ever defaulted on a debt or failed to fulfil a financial contract.
Everything is captured in this record, missed mortgage payments, repossession, bankruptcy, CCJs, IVAs, credit card defaults, etc.
Credit reference agencies collect other information about you, such as changes in employment or address. If your record shows that you make such changes frequently this will also lower your credit score.
Will You Ever Qualify For A Loan?
Generally speaking you will still be able to get a secured loan or mortgage, but there might be certain restrictions on your borrowing. Because of todays culture of debt there are an ever number of increasing lenders who specialise in loans for people with bad credit. Just keep in mind that you will probably be charged a higher interest and maybe offered a lower loan amount.
The positive part of this is that once you have secured the loan you can start repairing your adverse credit history by making regular, payments on time. It will take a little time to improve your credit history, but it will happen.
What Type Of Loan Can You Get?
You have the option of going for a secured loan or unsecured loan. Unsecured loans are more difficult to get because you dont put up collateral as security for the loan. This is risky for the lender so expect them to require more stringent loan terms in this situation.
Secured loans, on the other hand, require you to provide some form of asset as collateral. Most of the time this means you will secure the loan with your house. The amount of money you can borrow and the interest rate you will pay are influenced by your credit history, your total amount of debt, and your homes value.
Different lenders weight these items different ways, so be sure to check with several to find one with a product suited for you.
Where Do You Look For A Bad Credit Loan?
Before you submit any loan enquiries, you need to research a number of different lenders and brokers. Find out about their interest rates, any special loan terms they may require, and any other specifics about their loan process.
You can do all the research you want, but be careful not to submit a large number of loan enquiries over a short time period. This kind of activity can actually damage your credit history further.
Generally if you have an adverse credit history the best way to source a good loan is to use an independent broker. Make sure that they are not tied to one lender but have access to a large panel. Find out what fees they will charge and what are the reasons for charging these fees.
There are a large number of both secured and unsecured loan brokers in the UK, some are ethical others not so much, so make certain that you speak to as many as possible.