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Unsecured personal loans for people with bad credit
Late payments on credit cards, disputes over invoices
and oversights with household bills can sometimes lead to an impaired
credit history. When looking for a loan or mortgage in the UK,
this can turn out to be an obstacle. Any financial institution
will run a credit check when a customer applies for a loan, and
the rates and types of loans available will depend upon the outcome
of this credit check.
There are two types of personal loans available:
secured and unsecured. A secured loans means that the loan is
backed by a home, car or other assets, which the lender will have
recourse to, if the loan is not re-paid. Unsecured personal loan
means that the loan is not linked to any underlying security or
asset and in the event of a default on the loan, the lender will
have to go to the county court, to try to recover the money. However,
it is important to point out that unsecured loans can be difficult
to obtain, particularly for those with an impaired credit history,
and any lender willing to lend will charge a fairly high rate
of interest to take on the risk.
Personal loans are offered by lending institutions
such as banks and building societies and are available in a variety
of formats, each of which may differ in the possible size, term
and purpose of the loan. The maximum loan amount and length of
time over which the debt is repaid will not be the same for car
loans as for payday loans, for instance.
For personal loans, the amount borrowed usually
starts from £500 and upwards and is usually repayable over
a period of between 6 months and 10 years. Lenders basically charge
interest rates on the amount borrowed and the rates can either
be fixed or variable. If the interest rate is variable, the rate
changes with market forces and could change the amount to be repaid
by the borrower. Fixed interest rates offer more certainty, but
may be more expensive or at a higher rate than the prevailing
interest rate. As a general guide, it is advisable to compare
the Annual Percentage Rate, (APR) of different lenders. The APR
on a loan reflects the true cost of a loan to the borrower, taking
into account the loan interest rate and any additional charges.
This makes it easier to compare loans with different up-front
charges and introductory discounts, meaning the borrower can make
an informed choice when comparing loans that are being offered
from different lenders.
The advice given applies to the United Kingdom,
as governed by UK law.
