Loans for people with bad credit are one of the preferred financial solutions for those struggling with a bad credit history however there are a few alternatives that can also help gradually rebuild the credit score. In this article we’ll go through some of the advantages, disadvantages and alternate methods for people with bad credit.
There are various advantages to these loans that are provided and the obvious one for all of the solutions is the fact that your credit rating is not taken into account when you apply for a loan. Depending on the type of loan you take out the next is how fast you can get your hands on the cash. With an unsecured loan you can typically apply, be accepted and have the cash in your bank account within a few days; however with a secured loan you can be waiting for up to a week. The next advantage is it is by far the biggest solution available. Other offers such as payday loans and credit cards offer you up to a thousand pounds or however much you can put as a deposit, but these secured and unsecured loans can offer you up to £100,000.
The main disadvantage of loans for people with bad credit is definitely the amazingly high interest rates. Standard loans will maintain interest rates of around 11% however bad credit loans raise the bar to between 50 and 300% annual interest. Next in line (if you choose a secured loan) is that you are required to be a home owner in order to use your house as a kind of deposit on the loan. By putting the house in possession of the party throughout the loan the vendor is reassured that you are going to pay back on time. The danger with this is that if you miss payments frequently they can write of the loan by taking full possession of your home. This is purely based on a long term point of view and shouldn’t really be used for anything short term as you will end up agreeing to pay back over more than 1 year to allow the company to make profit through interest.
There are quite a few solutions available as alternatives to loans for people with bad credit. The main ones that someone would be interest in are Prepaid Credit Cards and Payday Loans. Prepaid credit cards require a down payment first and your credit limit is based around the amount you can pay upfront, you basically set your own limit. Credit cards are known to be amazing for repairing a bad credit, you can spend money, pay it back then spend it again and you have the chance to pay way before the payment is due.
The other great alternative is payday loans. These are much like loans for people with bad credit however they are a very short term solution. The problem is the interest rate which can reach the thousands, but if you take out a small loan of £100 until your next pay cheque the interest is quite small.
It is very important that you check out every option available to you when you are looking for loans for people with bad credit, use all of the resources on the internet and be sure to call around vendors to try and get the best possible offer for you.