Most people believe that in today's economic climate it is not possible to arrange bad credit loans however this is not the case. In fact as a result of the credit crunch there has been an introduction of a few new loan types that have come about so that people with bad credit can still arrange finance. The point of this article is to give you an insight into what options are open to you, so that you choose the best one for your circumstances.
Secured Loans
Secured loans are loans that require some form of collateral to be pledged to the lender, usually in the form a second charge on your home. Because the lender has the added security of knowing that no matter what happens they will get their money back they are more inclined to lend you the money even if your credit history is not as good as it should be. This type of loan is also generally available for larger sums of money than any other type of bad credit loan, and usually at better interest rates. You can borrow amounts from £5,000 up to £75,000 so long as you have the income to repay it and enough equity in your home. This type of loan also offers longer repayment periods offering terms of up to 25 years.
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Guarantor Loans
A guarantor loan is a relatively new type of loan that has significantly increased its market share since the credit crunch took hold of the UK finance industry. The lenders do not even require the applicant to undergo a credit search as part of the underwriting criteria, which means that unless you are in an IVA or registered as bankrupt you can still arrange a loan, no matter how bad your credit record. This type of loan requires that you have a guarantor (co-signee) that guarantees the lenders repayments if you do not keep up with them. The guarantor will need to be a homeowner with a good credit and earning at least £800 per month. You can borrow loan amounts from £500 to £5,000 although some lenders will only allow you to lend up to £3,000 at first, they will however let you top up the loan after you have maintained regular payments for 6 months. Depending on the loan amount that you require, the repayments can be spread over terms between 12 and 60 months. The interest rates charged for this type of loan are considerably higher than those charged for a secured loan.
Logbook Loans
A logbook loan or V5 loans as they are sometimes known are a type of secured loan, however rather than the loan being secured on your home they are secured on your car logbook. They can also be arranged without a credit check and are available for loan amounts up to £50,000 so long as your car is valuable enough. So no matter what your credit history if you can afford to repay the loan, and your car is free of finance you should have no problem arranging this type of loan. Even though the lender will hold your car logbook until you repay the loan in full, making it a pretty safe bet for the lender the rates they charge for this type of loan are still quite high.
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