Having a poor credit history may be a result of many factors such as missing or late payments on previous credit agreements, you may have had a CCJ against you, or even outstanding debt that you could not afford to pay back. Any defaults / CCJ and late or missed payments will stay on your credit file for 6 years before they “fall” off. It’s important to consider before applying for another loan.
Before applying for loans, it is important to think about How did you get into financial difficulties in the first place? as you do not want to get into the same situation as the past. Consider what’s changed and also other financial commitments before taking out another loan. For some loans, it may be worth having a look at applying for an introductory offer with a credit card or even a guarantor lender if you wish to borrow over a longer period of time.
Loans from these types of lenders are often described as sub-prime lenders as high street banks and mainstream credit card companies are very unlikely to offer yourself a credit agreement as they tend to prefer customers who have a good to perfect credit history as they are deemed to be of a lower risk.
So the obvious benefit of applying for a loan from bad credit direct lenders is that you have more likely to be accepted even with your not so perfect credit history. The bad credit loan you obtain could help with the situation you may be in such as emergency repairs to your car or home or even paying bills and covering living costs.
Getting a loan from these subprime lenders can also help you to rebuild and improve your credit history. In order to do that, It’s important that you make your repayments back on time and for the full amount each month as what’s agreed on your credit agreement. as you start to repay your loan back this will reflect on your credit file as lenders will notify credit agencies that you have been keeping up with payments and this will be a positive move to repairing your poor credit history so always make sure you repay every month and on time and this will show over time you are a trustworthy customer.
With all things that seem too good – there are also disadvantages of getting a bad credit loan. These sub-prime lenders tend to have a higher interest rate compared to others. The reason for this is that customers with a poor/bad credit history are deemed to be of a higher risk to them as they have shown a history of mismanagement of finances. They don’t take into other considerations and often rely on a system which has no human influence. Also, ensure that you borrow sensibly and that you can make repayments back on time as late payments can cause you serious money problems.
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If you are experiencing financial difficulty and need advice visit the Money Advice Service who can offer support and advice