A credit score, typically having a range from 0 to 999 is a number that is of great help to lenders like banks and other financial companies to assess the credit repaying ability of an applicant. You may require credit for the purchase of car, house or property and may not be able to fund it out of your own savings. At such times, one can avail of bad credit loans. However, having a history of bad credit makes it difficult to obtain a loan as such people are termed as high risk. That means, there is a high chance they may default on their payments, and no lender would wish to undertake such a risk. A bad credit is reflected by a low credit score.
The common types of loans available to people with bad credit are-
Guarantor Loans: A type of bad credit loan, the easiest way to get a loan to fix bad credit is to convince a homeowner with good credit to sign for you. While it’s not the easiest thing to do, especially if the homeowner you have in mind doesn’t think you’re financially responsible, it’s a very fast way to get a loan. Although it must be remembered that interest rates are very high. If you are borrowing more than a few thousand pounds, you could consider thinking twice because the interest rates can be crushing, and you only need about two years of quality loan repayments to help fix up your credit report. There’s usually no good reason to borrow more or for longer with these loan types.
Homeowner Loans: In case you own a house, and don’t need a loan on an immediate basis, you can leverage the equity in your home as a security against the loan. The downside of this is that you’ll be risking your home, since it’s your guarantee that you can repay the loan amount. Failing to pay as agreed, may end with losing your home to the lender. This can quickly accelerate your financial condition from bad to worse. However, some homeowner loans can be repaid over 25 years, which means you can borrow a decent amount of money at a relatively low monthly payment.
Logbook Loans: An old form of loan, this loan is actually attached to your vehicle. The loan interest is extremely high. However, if you are in a pinch, and are unable to get a loan anywhere else, this can be a great way to get a little financial boost to help fix your credit. The problem is that many people who get these loans already aren’t managing their finances properly. Most of the time it’s better to just sell your car, as you’ll get more money out of the deal in the long run.
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