Bad credit loans are a good option for people who may have difficulty obtaining financing due to previous late payments, CCJs, or defaults. There are a number of bad credit loan lenders now offering this type of financing, but you may be confused by the financial jargon used to describe loans that are specific to this sector of the market.
Some of the terms that refer to loans aimed at this market sector are: bad credit loans with no credit check and bad credit loans with an instant decision. The former is a useful option as it means people don’t have to worry about being turned down due to past financial difficulties. The latter also often implies that strict controls are unlikely to be carried out.
Another type of loan you may see advertised is bad credit loans with no fees. With this type of financing, the borrower will still have to pay interest on the amount borrowed. However, no setup fees or additional charges such as administration fees will be charged. Therefore, these can often prove to be beneficial.
In outlining the various types of products on offer, we’ll start by looking at bad credit unsecured loans. If you don’t want to insure your property against the amount you’ve borrowed, bad credit unsecured loans are a good option. However, the interest charged tends to be higher than that charged for secured forms of loans.
Types of unsecured bad credit loans include those that require a guarantor. In this case, the guarantor is usually a trusted family member or friend who guarantees to take care of the refunds on your behalf if you default. Guarantors are generally required for people who haven’t had a chance to build a credit history; for example, parents often act as guarantors for their adult children.
Another type of unsecured financing is when repayments are collected from the home. These are known as home collection loans. The amount awarded is usually low (usually between £100 and £500). A representative from the loan company calls the house regularly to collect payments, which typically occurs once a week or once a fortnight. There are also several types of secured financing available for people with poor credit. Loans can be secured against the house, car, or other property. In addition, payday loans depend on the borrower earning a regular income and the amount granted is repaid as soon as the borrower’s salary is credited to his account.
Even a visit to the lenders is a form of guaranteed financing. The borrower takes his assets to the lender, who lends him a sum of money based on the perceived value of the assets. The person then returns at some point in the future and repays the sum of money with interest in exchange for his assets, which have acted as collateral against the sum of money that was borrowed.