Getting Bad Credit Personal Loans UK - An Overview

Are you a UK citizen who has been regularly in debt? Have you defaulted previously with your loan payments? Have you had a bankruptcy declaration in recent times, unable to pay your creditors? Are you seeking bad credit personal loans UK for an immediate expenditure?

If the answer to any of the previous questions is yes, then you need to pause and take stock of your financial state before opting for more loans. You must think about why you have a bad credit score in the first place and how you can improve the bad credit rating. Unless the need for a loan is unavoidable, applying for bad credit personal loans UK may pull down your credit score in Britain even further.

This article deals with the question of bad credit ratings of individuals in Britain and bad credit personal loans UK. This article also reviews the advantages and disadvantages of bad credit personal loans.

• Payment defaults - If you've taken previous loans including bad credit UK personal loans and failed to make timely payments, your credit score is affected.
• Bankruptcy - If you have a previous history of bankruptcy and money owed to lenders, your credit score will take a dip. Bad credit UK personal loans providers will consider you a high-risk borrower.
• Irregular income - If you don't have regular employment, credit rating will be low.
• Poor credit history - If you have moved recently to the UK, and don't have much of credit history, then this too is a drawback as lenders will not know about your ability to repay credit.
• County Court Judgements (CCJ) - England and Wales in UK have county courts where any lender can file a case against a borrower in case of non-payments. The county court may pass a judgement ordering repayment of the loan, failing which assets of the borrower can be attached. County court judgements and defaults badly affect credit rating. Bad credit UK personal loans providers consider CCJ before deciding loans.

A borrower with a bad credit score will have to approach bad credit UK personal loans providers if they require further loans. Such loan providers would factor in your bad credit rating when they decide the terms of your loans. Let's see how.

Terms of Personal Loans in the UK for Bad Credit Rating

Why is it difficult for borrowers with bad credit to get loans in the UK? That's because a person who has bad credit is seen as a high-risk debtor by bad credit personal loans UK providers. There's higher risk for the lender as the chance for loan payment defaults is more.

To offset the risk, providers of personal loans in the UK for bad credit rating individuals impose terms such as:

• Higher Annual Percentage of Rate (APR) - The APR for personal loans in the UK for bad credit rating will be higher than personal loans meant for people with better credit scores. For example, personal loans for a good credit score may have an APR ranging from 7.7% to 9%, an APR for a bad credit profile will be higher.
• Lower Loan amounts - Lenders may limit the amount you can borrow which will be less than what is offered to a person with good credit profile.

Some benefits of Bad Credit Personal Loans UK

Bad credit personal loans providers in the UK ensure that even people with a poor or bad credit history can get access to personal loans for expenses such as sudden medical bills, education expenses or for consumer goods purchases. The bad credit rating of an individual does not come in the way of loan approval.

You can also use a bad credit personal loan to borrow emergency cash to pay a late fine on another credit card loan or other loans. Many borrowers in the UK also use bad credit personal loans UK as a means of debt consolidation.

The Pitfalls of Bad Credit Personal Loans UK

Financial experts worry that personal loans for people with bad credit ratings can further push borrowers towards a insurmountable debt. People with a poor credit score are those who have defaulted in the past on loan payments or have a history of bankruptcy. Financial advisers caution that if UK citizens with bad credit rating apply for more personal loans to pay off existing debt or for extra expenditure, they may not be able to repay their new loans.

Lessons have to be learnt from the real estate sub prime lending crisis in the US which lead to a global financial downturn and a credit crunch. US housing loan providers provided housing finance to sub prime candidates - that is borrowers who do not meet the normal eligibility conditions laid down by banks or other financial institutions. The result was that people took out housing loans which they could not afford to repay. When payment defaults touched epidemic numbers, housing foreclosures also touched new heights. Sub prime borrowers were left with nothing but huge debts.

This is why most lenders in the UK are cautious in a financial climate which is still seething from the effects of the sub prime crisis. Although bad credit personal loans do not involve as large amounts as housing loans, secured bad credit personal loans may still be risky for borrowers with poor financial management skills as they may lose their collateral.

Unsecured bad credit personal loans UK borrowers may take on more than they can chew when taking on high interest personal loans. Loan seekers with poor credit scores should make sure that they are capable of making timely payments, else their credit rating may further deteriorate and they may have to make late fine payments.