When people talk about bad credit loans, they’re referring to a type of borrowing that’s available to people who have a poor credit rating.
If you think you have a poor credit rating, then you may have had difficulties in securing credit from mainstream lenders. You may have had a loan previously and struggled to keep up with the repayments, or received a County Court Judgement if you’ve experienced difficulties with paying off credit in the past.
Alternatively, you may have no credit history at all simply because you’ve never had a credit card or a loan before. This means lenders don’t have much evidence to suggest that you’re able to keep to the payment schedule of a loan, and therefore, they may be apprehensive in lending to you.
The main advantage of a bad credit loan is you may still be able to borrow money, even if your credit rating is poor. Another potential positive is that keeping up with repayments on a bad credit loan may, in some circumstances, help to repair your credit rating.
While mainstream lenders may turn people with bad credit away, at Provident, we may offer a helping hand when other lenders won’t.
As part of the application process for one of our doorstep loans, a member of our locally based team will sit down with you, and carry out an affordability assessment to work out how much you can afford to borrow, and also ensure that you can comfortably manage your repayments every week.
There are disadvantages to taking out a bad credit loan, too. Most notably, interest rates on this type of loan are often higher than other forms of lending. This is simply because lending to someone with a poor credit rating can be thought of as a higher risk by some lenders.
Failing to keep up with loan repayments can also lower your credit score, so could place yourself in a worse position if you’re unable to manage your money.
As bad credit loans typically come with higher interest rates than standard loans, you may want to work on improving your credit score so that you can access a wider choice of money borrowing options.
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Consider the total amount payable with the length of the repayment schedule you’re looking for. If you repay your loan over a longer term, you’re likely to end up paying a greater amount of interest than if you pay it off over a shorter period of time.
Selecting the right bad credit loan for you can be tricky, so it’s always important to do as much research as you can before making a final decision.
Weighing up the pros and cons of the type of lending available to you, as well as browsing the full market to see the best value borrowing on offer, should lead to finding the right loan for you.
It is always worthwhile to check your credit file before applying for any kind of credit, because if you’re able to correct any mistakes that might be on there, this may improve your score.
Understanding your credit file may also help you to avoid applying for credit from lenders who are unlikely to accept you. This is important, as being declined for credit can make your credit file worse.