Borrowing with bad credit

People with bad credit are becoming increasingly common in the UK, and with the huge levels of consumer debt that have dogged the UK over recent years it comes as no surprise that bad debt levels have rocketed and a rising number of individuals and households have found themselves with poor credit. In the past having bad credit made life extremely difficult, as no lender would entertain the idea of letting someone with poor credit borrow money. This meant that those with poor credit would find it very difficult or even impossible to get anything from a car loan or mortgage to a loan or a credit card.

The good news is that things have changed over the years, and tougher competition amongst lenders coupled with increasing numbers of people with tarnished credit has means that lenders have had to start looking at filling this gap in the market by tailoring financial products to meet the needs of those with bad credit. Individuals with bad credit will still find it difficult to get affordable credit, and will have to pay way over the odds in terms of interest rates in most cases, but at least there are now financial products available for those with credit problems, making it possible for even those with poor credit to get finance. Another good thing about these financial products for those with bad credit is that, through responsible and timely repayments the consumers can slowly but surely start to rebuild their credit.

These days you can get all sorts of financial products that cater for bad credit consumers, and there are a number of lenders that are able to offer this type of credit. You will find credit cards for those with bad credit, loans for those with damaged credit, car finance for bad credit consumers, and even mortgages for the sub-prime market, which means those with bad credit histories and low credit ratings. As with any other type of finance you will need to meet eligibility requirements in terms of age, income, employment, and other factors, and you should also take the time to compare a range of products so that you get the best deal possible, even if interest rates are higher than the norm due to being bad credit finance.

Credit cards for those with bad credit

A number of credit card providers, such as Capital One and Vanquis, now offer credit cards for those with damaged credit. The interest rate on these credit cards is considerably higher than with standard credit cards, and there are no rewards or freebies offered. The credit limit available will depend on your credit rating and income, but generally starts off low, which reduces the chance of adding to the borrower’s debt in any significant way.

By using a bad credit credit card you can slowly start to rebuild your credit through making repayments on time and for at least the amount requested. By making larger repayments – or better still repaying the balance in full each month – you can further improve your credit and you can even avoid having to pay interest providing you always clear the balance within the interest free period. Once your credit starts to improve you will find yourself eligible for more mainstream and lower interest credit cards.

Loans for those with bad credit

When it comes to getting a loan those with poor credit may face severe difficulties. If your credit is bad then the chances of getting an unsecured loan are very slim, as most unsecured lenders will not be prepared to take a risk on someone that had poor credit. However, if you have bad credit and you are a homeowner you may find that a number of lenders are able to offer you secured finance.

With a secured loan you must make sure that you can afford the repayments, as there is a lot more than just your credit rating at risk. If you default on payments on a secured loan you could end up losing your home as well as further damaging your credit. The interest rate that you will be charged on these loans will vary based on your credit and other factors, but you will have to be prepared to pay a higher rate of interest than someone with good credit.

Mortgages for those with bad credit

Sub-prime mortgages are mortgages designed for those with bad credit, and interest rates charged on these mortgages can be extortionate. You can still fix your interest rates with sub-prime mortgages, but you will have to fix them at the high rate that the lender charges on them. However, as your credit improves you will be able to switch to a more competitive mortgage through a mainstream lender. Again, you need to make sure that you can keep up with repayments on your mortgage otherwise you could end up losing your home.

You may also find that the amount that you can borrow as a bad credit consumer is far less than those with good credit, and with house prices the way they are this may make it difficult to afford a property if you have poor credit. As with all types of finance you should shop around, or better still go through a bad credit mortgage broker who will be able to find suitable lenders and the most competitive interest rates based on your circumstances and the level of damage to your credit.

Car finance options for those with bad credit

Getting a conventional car loan from a high street lender will be difficult if you have bad credit, but you will find that there are specialist car dealerships that cater for those with bad credit and will offer finance on vehicles from their own showrooms. Although this means restricted choice and will usually involve extortionate interest rates it is one solution for those that need to get a vehicle but cannot get a regular car loan. Another solution, which offers more choice in vehicles and may mean lower interest rates is to opt for a secured loan, but you would need to be a homeowner to do this.