Bad Credit

Your Guide to Getting a Loan with Bad Credit

If you have a credit history that’s been covered in black spots by missed payments or late repayments, then you’re not alone. Many people throughout the UK find themselves struggling with credit based problems, simply because it seems as though there’s never enough cash to pay for all the bills that come with day to day life.

Even if you’re incredibly careful with the way you manage your money, there’s always a chance that something unexpected could come along and ruin your hard-earned savings, forcing you to turn to a credit card or loan for help. Unfortunately, if you have bad credit, the chances are that you’ll struggle to get a loan from your average high-street lender. At least, if you do find a loan, you might also find that you need to pay a significant amount in terms of APR or interest rates.

What Counts as Bad Credit?

You might have a general idea of what your credit rating looks like, but you’re not sure whether your number is “bad” or just slightly below average. If you are considered to have a significantly poor credit rating – one that’s going to hinder your ability to borrow money in the future – then the chances are that you missed repayments in the past. Some people end up with bad credit after they have had a bankruptcy or CCJ against their name. There’s a huge difference between no credit, and bad credit.

No credit is when you haven’t ever taken on any kind of credit card or loan, so you haven’t had a chance to build any kind of history into how you spend and repay money. This can be as problematic as having bad credit in some cases, as many lenders want to feel more comfortable about their ability to trust you with their money. However, if you have no credit, that doesn’t mean that your lenders aren’t going to consider you, but it does mean that you’ll struggle more to find a good deal. Both people with no credit and bad credit will find that their options for borrowing money are limited, and that they will be subject to higher interest payments than they would have been with clearer credit ratings.

Can I Fix my Credit?

The good news for people with bad credit is that there are plenty of simple ways to fix their credit score. This can include making sure that your name is on the electoral roll when your authority sends details to your door. If you’re not on the electoral roll then you’ll struggle to build up any kind of positive credit history.

It’s also very important to spread out the applications that you make for credit, as every time you ask a lender for money, you’ll be dealing with a footprint on your file that could be easily rejected by any other lender. At the end of the day, nobody wants to work with someone who has already been rejected by a range of other companies, so avoid covering your history report in smudges.

Perhaps the best way to go about fixing your credit rating is to make sure that you are cautious with the way you make repayments when you are finally given a loan. A tarnished credit rating will only get worse if you don’t pay back the money that you borrowed on time or fail to stick to the agreements that you made with your bank or lending company.

What are Bad Credit Loans

When you have bad credit, you won’t be able to apply for the best available loans, so that means that you’re going to have to struggle and look elsewhere for a lender who’s willing to consider you despite your poor history. In most circumstances, this means giving up on the most attractive rates and terms. Instead, you’ll need to consider the benefits and negatives of taking out a bad credit loan.

Bad credit loans are given to people who are considered by the bank or lending society to be a riskier option. Usually, they come with lower limits, which means that you can’t borrow as much, as well as higher interest rates. The more of a threat your lender considers you to be, the higher your interest rates will grow, until you are dealing with very high APRs.

With that in mind, it’s also worth noting that your lender will want to consider other factors besides your credit history when deciding whether or not to give you a loan. For instance, some people will want to consider your stability, salary, and various other assets such as property too.

While you’ll probably have to deal with very high interest charges if you take out a bad credit loan, there are some benefits to consider too. For example, by having A loan you will have the perfect opportunity to start making positive changes to your credit history – so that you struggle less to apply for cash in the future.

Loans

What Are the Different Types of Loan?

A loan is a sum of money that you can borrow from an institution with the intention of paying it back, either over time or all in one go. Usually, you’ll need to pay back the amount that you have borrowed with interest. Loans are typically offered in a fixed amount, and the exact amount that you borrow will depend on a number of different factors, from how much you need, to how much your credit history allows you to reasonably ask for.
There are many different types of loan available, and knowing your loan options will help you to make more informed decisions about the type of cash you need to access when meeting your goals.

Closed-Ended and Open-Ended Loans

Let’s start by looking at closed-ended and open-ended loans. With open-ended loans, you can borrow money over and over again without incurring problems, so long as you continue to pay off the amount you owe. Lines of credit and credit cards are some of the most common types of open-ended loan. Both of these come with a credit limit which represents the maximum amount any person can borrow at one given time. Every time you purchase something, your credit will decrease, and as you make payments into your credit card, your available credit will increase.

Closed-ended loans, on the other hand are loans that can’t be accessed again once they have been repaid. When you make payments on a closed-ended loan, the balance of your loan will go down. If you want to borrow more money, you’ll need to apply for another loan and pay it off all over again. An example of a closed ended loan might be a car or student loan.

Unsecured and Secured Loans

Now that you understand the concept of unsecured and secured loans a little better, you should be able to further understand the nature of secured and unsecured loans. Secured loans are the loans that rely exclusively on an asset as collateral for the overall loan. In the event of a default on the loan, the lender will be able to take possession of the asset and use that as value to cover the loan. Secured loan interest rates can be lower than the interest rates for unsecured loan because the lender will have some form of protection.

Of course, in order to get a secured loan properly, you may find that the asset that the loan is being taken out against needs to be assessed by an appraiser so you can determine its full value before accessing your loan. A title loan may be one of the most common examples of a secured loan.

On the other hand, unsecured loans don’t require any kind of asset in place for collateral. Instead, these loans may be more difficult to get, and generally come with higher interest rates because the lender doesn’t have any kind of security. Unsecured loans rely completely on the reliability of your credit history and your current income, and these numbers are used to determine whether you are trustworthy enough to lend to. If you default on your unsecured loan, then your lender will have to exhaust a range of collection options, and may also give your details to debt collectors to try and recover the money they are owed.

What’s a Conventional Loan?

When it comes to loans and lending, one of the most common areas to address is that of the mortgage. The term conventional loan is generally used for mortgages, and this term also refers to any loans that are not insured by a government agency such as the FHA or federal housing administration, or the RHS – otherwise known as the rural housing services. Conventional loans can sometimes be conforming, which basically means that they follow the guidelines that have been set forth for certain types of loans.

Which Loans Should you Avoid?

Though only you can decide what kind of loan you need for your specific goals or ambitions, there are certain types of loan that should generally be avoided at all costs because they can sometimes take advantage of customers and leave you in a very difficult financial position. For instance, short-term loans that allow you to access a significant amount of money before payday can sometimes be dangerous because they come with high annual percentage rates that are extremely difficult to pay off.

If you are in a very difficult financial position, you should always consider the different options that are available to you in full before you take out a payday loan. It’s also important to double check any loan offers that seem too good to be true or may be with lenders that you aren’t familiar with. Sometimes financial options can be given that look similar to loans but are actually extremely dangerous cons.

Debt

The Easy way to get out of Debt

When you are in debt it can seem that you will never be able to get out of it. It can feel like it is easy to pile up the debt but very difficult to get rid of it again. However, there are ways that you can get out of debt that may not be so hard as you imagine.

The first step is to stop increasing the debt so that you do not make the problem worse. Cut up any credit cards that you have and start making sure that you only buy things that are necessary. Think about the items that you have to buy such as food, utilities, and rent and separate those form the things that you do not need to buy such as going out, clothing, subscriptions etc. You will find that this can be quite difficult as there are items that are not completely necessary but would make life very difficult if you did not have. However, if you can cut out buying things that you feel are not necessary then this can be a good start in making sure that you do not overspend.

It can be wise to go through everything in fine detail. Look at exactly what you are spending each month, write it all down. Then you will be able to see what money you need to spend and how much is being spent on things that are not necessary. It can be hard to cut down on spending. Buying only the basics can feel like you are punishing yourself. However, if you want to be free of debt it is exactly what you will need to do. You will need to cut back so that you are no longer spending more than you can afford to spend. Therefore you need to look at your income and carefully budget. Make sure that you allocate enough of it to pay for the essentials and then look at what is left to buy other things with. This money is what you can use to start paying off the debt.

You also need to think hard about how you can raise more money. The more of the debt you pay off each month, the more quickly it will disappear. You may be able to get more hours in your job, ask for a pay rise, get a second job, do freelance work, sell things or something else. Think through all of the options available to you in order to raise more money and you will find that there are a lot. You will need time in order to do most of them, but some can be a lot of fun and you could find that you can generate a good chunk of extra income. Also make sure that you are not overspending on things like utility bills, food, rent and finances. Use comparison websites and see whether there are ways that you can cut down the areas where you spend the most money.

Now that you have some extra money and reduced outgoings you need to actually tackle paying off the debts. You need to look at them all and compare them. It is wise to pay off the ones that are more expensive to start with as that makes more financial sense. However, there are some people that prefer to pay off the smaller debts first so they can see them disappearing and that motivates them to keep going. It is up to you which you choose to do.

As you start to reduce your debt, you will pay out less in fees, charges and interest payments and that means that you will have more money left to pay off the debt. You will find that you can pay it off quicker and quicker and it should help to motivate you to continue.

Although the method is easy, the changes that you will need to make could be more of a challenge. Money management can be difficult, particularly if you are not used to it. If you think it will be a challenge then it could be wise to ask someone for help. There might be a close friend or family member that you can open up to who will sit down with you and help you get all of the information together. They could help you with finding extra work or income streams, with deciding what to pay off and when and with finding cheaper items to buy. There are also charities and organisations that can help you with this sort of thing. In the UK the Citizens Advice Bureau would have details of where you could go for help. This could be an option for someone who has no one to help or who does not feel that they can tell friends or family about their situation.