Secured Loans

Bad Credit Secured Loan

Getting a bad credit secured loan can often be the only option for people with low credit scores who are looking for a loan product in the UK. Many of us in Britain suffer from having poor credit ratings. This can happen for numerous reasons, not all of them the fault of the borrower. Due to the high cost of living and fast pace of life keeping track of consistent payments can be a struggle and it is easy to fall into debt related problems which affect our ability to borrow.

If you need a secured or unsecured loan and have a bad rating you will want to know what your options are. While certainly the outlook is not as bright as for those with perfect a credit history that doesn't mean you are totally unable to borrow. It does, however, make it likely that you will need to look into getting a bad credit secured loan.

Credit Scores and Loan Products

While it may seem unfair that prior history has such an effect on your ability to use financial lending products, it actually makes sense from both the point of view of the bank and the customer. The bank can only go on the raw details of your previous borrowing and if you have a history of bad debts and missed payments it indicates you are not going to be responsible with further products. Also, there is an argument that it is for the protection of the customer - that it stops those who have bad financial management skills from borrowing more and slipping further into financial trouble.

This, of course, does not take into account all the variables that can come up that effect ratings and make debtors likely to default on a loan - medical emergencies, changes in living situation, changes in family dynamics - that are beyond their control. So, if you feel like you are able to handle a secured loan despite your bad credit score you'll be glad to hear that there are products that will be available for you to buy. There are no hard and fast rules about bad credit secured loan products and their availability. Therefore, even with a low score, you should be able to find a loan for you.

Sub Prime Lending

Sub prime lending is specifically targeted to those with bad scores who need to borrow money. In order to deal with the greater risk these customers pose, lenders charge quite high rates of interest that are likely to move quickly in an upward direction. Though they can be difficult to predict and budget for these bad credit secured loans can be great for repairing your rating. That is, of course, as long as you make all the payments on time and consistently. If you do not have faith in your ability to do so, perhaps you should look at alternatives to a bad credit secured loan as that might harm your rating further.

Those with low ratings who are hoping to get something unsecured will have a lot of difficulty. Even for customers with good ratings lenders prefer to have the application backed up and secured with some form of asset. This lessens the risk for them and gives you a further, tangible reason to make payments beyond loosing points in your rating. If you already have a low score lenders are likely to insist that any further borrowing will be secured as it is the only way they can be sure you will definitely complete the course of payments.

Advantages and Disadvantages

The obvious advantage to a bad credit secured loan is that they might be the only way for you to get a quick lend of money from the bank if you hold a low rating. Potential borrowers should also be aware of some of the drawbacks, however. The clearest one is the price. You will pay more for a bad credit secured loan than for a standard borrowing. The interest will be unpredictable, so you need to be ready and responsible in your repayments. Also, if you hold a bad credit secured loan and wish to apply for debt management programmes, the secured debt will not be liable to be consolidated with the others, which can be a real problem if you owe money to multiple creditors.

When used right and paid off consistently and steadily a bad credit secured loan can be really useful products. As well as give you a quick injection of cash for whatever purpose you have in mind they can help prove to the bank that you are a responsible borrower and customer. They do come with their hazards but as long as you are aware of these and can avoid slipping up in payments a bad credit secured loan are worth looking into.