Use our UK Finance guide and learn by experience. We outline pitfalls so that you don't have to learn the hard way, as many of us often do.
Loans
Adverse Credit Loans
Have you been refused a loan because of a poor credit rating? This is a situation that more and more people are finding themselves in nowadays, and whilst in the past it may have been near impossible to access financing in such a predicament, there are now a lot of companies who provide adverse credit loans. UK adverse credit loan companies now realise that having a poor credit history does not necessarily mean that you are as high a non-payment risk as would previously have been assumed.
Normal loans vs. adverse credit loans.
Having said that, few companies will be prepared to offer you a normal loan if you have at some time in the past had troubles with your credit record. This could involve CCJ's (County Court Judgements), or payment arrears on any loan or credit facilities in your name. The difference between a normal loan and an adverse credit loan essentially, is that the adverse credit loan will attract a higher rate of interest. This won't usually be a drastic difference and equates to a small price to pay when you don't have the option of a normal loan on the table. Of course there are ways to repair your credit record, but this takes time and might not therefore be a viable option, depending on your personal circumstances.
Secured adverse credit loan.
A secured adverse credit loan, sometimes referred to as an adverse credit home loan is the most common type of adverse credit loan, and can be applied for when you have some equity or ownership in a property. If your property is worth more than the amount outstanding on your mortgage, you have equity. When you apply for a secured adverse credit loan, your equity in respect of your property will act as your collateral, i.e. your adverse credit loan will be secured against the ownership you have in your property. Although you may own a fixed property, if you cannot prove to your UK adverse credit loan issuer that you will be capable of meeting your monthly commitments in terms of repayments, they will not be happy to grant you an adverse credit loan. To this end you should make sure that for the past few months at least, you have made all repayments (even if only the minimum amount) on any existing loan facilities you hold, on time. If an adverse credit loan issuer sees you as a responsible borrower whose debt level is not unmanageable, you will stand a better chance of being granted the adverse credit loan you're applying for. Secured adverse credit loans range in principal from £5,000 to £75,000 and can be used for any purpose. They constitute a fairly low-cost form of borrowing because they are secured against property and are usually fairly long-term facilities.
Unsecured adverse credit loan.
An unsecured adverse credit loan is a loan instrument used by people who have a poor credit record and who do not hold equity in property. These loans are usually issued for far smaller amounts than secured adverse credit loans and a successful application will depend on the loan issuer being satisfied with your proof of employment and steady income. An unsecured adverse credit loan issuer will normally expect the loan to be repaid within two weeks of its issue. In this respect, the unsecured adverse credit loan can be viewed as a type of cash advance and is sometimes referred to as a payday loan.
Summary.
Having a poor credit history is no longer the dilemma it has been in the past. With an estimated one out of every four Britons having an adverse credit record, there are many adverse credit loan issuers out there competing for your business. If you own property and are responsible in terms of your monthly financial obligations, you shouldn't have any problem applying for, and being granted, an adverse credit loan facility. Bear in mind though, that with plenty of adverse credit loan companies out there vying for your signature, you would be wise to do as much research and shopping around as possible before making a final decision. Make sure your adverse credit loan issuer is a reputable company and that you fully understand the terms and conditions of your agreement before signing an adverse credit loan agreement. Ensure that you are aware of any costs such as administration fees and interest charges, which will affect your APR and compare the APR's of various adverse credit loan companies when trying to decide on a provider. If you are at all in doubt, consult a financial advisor for qualified, independent advice.
