What options are there for people with a bad credit score?
Your options really depend on how urgently you need to borrow. If time is on your side, you can take some actions that will, over time, repair or build a better credit rating. This in turn will open up more of the mainstream lending market to you. For example, check with the three UK credit history companies and make sure their records are up to date and correct (for more information on improving your credit rating ).
However, if you need the loan more immediately than that, there are loans specifically designed for people with poor credit history.
Called bad credit loans, they might provide a financial lifeline if you are in need of funds either for an essential purchase or perhaps to consolidate other debts into one cheaper option.
Provided you’re able to meet the repayments, every time, on time, taking out a bad credit loan could actually help you repair your credit history. Proving that you can pay back the loan on time each month will improve lender confidence and should make it easier to obtain credit next time.
The downside of this type of loan is that the interest rates attached to them are very high compared to conventional loans. This is because the lenders demand a greater fee to compensate for the extra risk that they consider they’re taking by lending to you.
Make sure you also pay attention to whether the loan is called secured or unsecured. Secured means that the loan is secured against another asset, usually your home. While secured loans are cheaper than unsecured ones, they obviously carry the risk that if you fail to repay the loan you could be forced to sell your house to repay the debt.