It is an odd truth, but even when you have a bad credit history there are lenders who will advance you a loan.
Finding these lenders is not always easy. Especially since anyone with a bad credit history is assumed to be a risk and institutions are averse to risks. Never-the-less lenders are out there, and if you have something like a home to secure your loan against they will make themselves known.
What to do when you find a lender
When you do come across a lender, however, be restrained.
You might have struck it lucky. The first lender you meet might have the best rates and terms. But these things vary greatly, so you would be wise to make sure. Check out the alternatives. In fact, when you need a loan, you should make a conscious effort to slow down and be careful because you need to find the very best rate and terms. Small differences in the number before the percentage symbol are significant down the road.
For instance, a typical loan from a large bank to a borrower with a good record of debt -- someone who has always paid their credit card on time, someone who has consistently met mortgage repayments, someone who doesn't buy on hire purchase often but repays regularly when they do -- is around 6%.
A loan is expensive
If you're a lender with a bad record of debt you will not be so fortunate. A bad credit loan could cost you 12%. That's twice as much as your neighbour with a good record. And the amount of money you pay back, over the lifetime of that loan will be significantly greater than what your neighbour pays. Indeed, if you have a 30 year loan of £100,000 and are paying 12% for it, you will repay more than £154,000 over the years. This is the difference that bad credit makes. So you need to fight as hard as you can to keep your rate as low as possible.
But there is another reason to tread carefully when you're offered a bad credit loan: less than scrupulous salesmen will hide the fees you will need to pay when the loan is activated.
Yes, there are fees. Not only do you face uncomfortably high interest rates you will need to find out what fees and other charges are involved in getting your loan and starting to make repayments. Some of these fees are substantial. And sometimes agent for the lender will skirt over these quickly, to avoid frightening you away so you get your loan through his company and he gets his commission. You need to know about the fees well before you sign up for the loan you need so badly.
Find out about the fees
This is not as easy as it sounds. The lender knows the rules and the hidden costs; you will need to trust your lender to tell you what all the costs are, since you are a beginner, a mere babe in arms.
So ask about fees. And press your lender, to find out how reliable and trustworthy he is. Only then look to signing up for your bad credit loan.
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