Bad credit loan lenders may not advertise extensively, but they are achieving record levels of business on the high street and Internet. This is because the number of people with an adverse credit history has swelled during the past 12 months.
However, when money problems do set-in and the mortgage or rent needs to be paid, getting a cash advance today could help someone out of a financial hole. Whilst the interest rate charged by bad credit loan lenders reflects the higher risk posed, it does mean that a guaranteed personal loan is only suitable as a source of short-term borrowing.
Personal Debt Problems
- The average personal debt (excluding mortgages) in the UK was £9,240.
- Including mortgages, the median amount of debt increases to £58,320.
- The average owed by every UK adult is now £30,460.
* The above statistics were provided by Credit Action in August 2009.
If an income-to-debt ratio is too high, a debt-free solution may provide a better alternative than going to a bad credit loan lender. Consider talking to a credit counselor.
Bad Credit Loan Lenders
Guaranteed personal loans are available from pawnbrokers, doorstep lenders, Credit Unions and same day payday loan providers. Whilst some no credit check loans require collateral, others will lend money without the provision of security. However, providing collateral will normally mean a reduced APR and the possibility of an extended borrowing term.
Same Day Payday Loans
It is possible to get an unsecured, same day payday loan for any purpose. The applicant will need to be in full-time work and be able to provide two forms of identification. Bad credit loan lenders typically charge £20 per month for every £100 that is borrowed.
The term of a loan is only a single month because borrowing for any longer would prove too expensive. Only take out a same day pay day loan in an absolute emergency . Make sure that sufficient money is available the subsequent month as disposable income will now be lower.
Credit Union Loans
Unlike same day payday loan providers, a Credit Union is a bad credit loan lender that doesn't operate with the motivation of making profit. They work purely for the interests of their members. It is only possible to join a Credit Union on the basis of a shared interest, such as locality or work.
A Credit Union loan cannot legally charge its members more than 2% APR per month, equivalent to an annual rate of 26.8%.. Should someone encounter money problems, they will work with the member to formulate an affordable repayment plan.
Doorstep Lenders
Bad credit loan lenders, such as Provident Financial, offer loans for between £100 and £500. However, existing customers may be able to borrow as much as £2,500. The typical APR is 189.2%. Unlike same day payday loans, it is possible to borrow money for up to a year.
Pawnbroker Loans
Pawnbrokers offer a cash advance today based upon the provision of collateral, such as gold, jewelry and electronic equipment. The typical APR is 85%, although this is often lower on some of the larger loans. Guaranteed personal loans are available for up to £10,000 over a 6 month repayment term. It may be possible to extend the term by a further 6 months.
Bad credit loan lenders provide a useful service that most banks fail to accommodate. However, getting a cash advance today or at short notice with an adverse credit history means that the cost of borrowing is high. Only borrow money in an absolute emergency and keep the term as short as possible.
Sources
Creditaction.org.uk
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