Loans Expert

Unsecured personal loans are typically available for amounts ranging from ?1,000 to ?25,000 over a variety of repayment terms. If you have a poor credit rating, however you may find that an unsecured loan – that is a loan that is not “secured” on your home or any other asset – is much more difficult to obtain than otherwise.

This is because lenders have no rights to the your assets in the event that you default on loan repayments, in the first instance, and your credit rating demonstrates that you are a higher risk to lenders in this respect. Many mainstream lenders (banks, building societies, etc.) are unwilling to consider unsecured loan applications from any borrower whose credit rating is below average – this is particularly true in times of economic downturn or recession – so you may need to turn instead to a specialist direct lender.

Unsecured Personal Bad Credit Loan Considerations

It is a fact that as many as 25% of borrowers in the United Kingdom have an impaired credit history, due to arrears or defaults on mortgages, loans, credit cards, etc. So demand for unsecured personal bad credit loans is high, and the marketplace is reasonably competitive. This means that interest rates for unsecured bad credit loans – although still higher than those for unsecured loans available to borrowers with average or better credit ratings – are similarly competitive. The majority of lenders place do not place restrictions on what an unsecured personal bad credit loan can be used for. Typically with the exception of commercial purposes, timeshare, etc. – so debt consolidation, home improvement, a car, a holiday, or indeed any legal purpose, is generally acceptable.

There is however, a large variation in the APR (“Annual Percentage Rate”) of unsecured personal bad credit loans across the market – 12% to 50% or more is typical – so it often pays to shop around. The APR, which includes factors such as the term of the loan agreement, fees, compulsory insurance, etc., as well as the interest rate payable, is an indication of the true, annual cost of a loan, and is therefore the best way of comparing one loan with another. By law – in fact, under the Consumer Credit Act 1974 – any lender must quote the APR of any loan or credit agreement, in writing.

It may be of course, that you have a poor credit rating for reasons other than strictly “bad credit” per se; if you have no credit history at all or if you are self-employed with an irregular income pattern for example, or even if you have changed addresses on a regular basis, you may fail to meet the criteria specified by mainstream lenders. If you need to apply for an unsecured personal loan and you know or suspect, that your credit rating has been damaged to some degree, it may be worthwhile to obtain your current credit rating and a copy of your credit history file. Both of which can be obtained for a small fee, from credit reference agencies, such as Experian, or Equifax. This will give you the opportunity to check that the information contained there is accurate and up-to-date – you are legally entitled to have erroneous entries corrected, or removed – and in terms of your credit rating to see exactly where you stand in relation to other borrowers.

Do bear in mind that an unsecured loan, while not secured directly against your assets, is still a major financial commitment. If you are unable to keep up the monthly repayments, a lender may sue you for repayment or in the worst case, petition for your bankruptcy. If you are uncertain as to whether or not an unsecured personal bad credit loan is appropriate to your own financial circumstances, you should seek independent, professional advice, from an IFA (“Independent Financial Advisor”), or similar individual.

Furthermore, if you do commit to an unsecured personal bad credit loan and find that you have misunderstood its implications, or simply changed your mind, remember that you are allowed a cancellation, or “cooling off” period – typically of 10, or 14 days – in which you can cancel the contract without charge or obligation. This is a consumer protection measure, under the Consumer Credit Act, 1974, to prevent pressure selling of inappropriate financial products.

Related posts:

• Are Unsecured and Personal Loans the Same?
• Compare Personal Loans: An Easy Way To Get The Best Deal
• Unsecured Personal Loans
• Unsecured Bad Credit Loans
• Deciding Which Type of Personal Loan is Best for You

Tags: Bad Credit Loans, Personal Loans