The different types of loans with bad credit
Bad credit loans are a good option for people who may have difficulty obtaining financing due to previous late payments, CCJs, or defaults. There are a number of bad credit loan lenders now offering this type of financing, but you may be confused by the financial jargon used to describe loans that are specific to this sector of the market.
Some of the terms that refer to loans aimed at this sector of the market are: bad credit loans without credit check and bad credit loans with instant decision. The former is a useful option, as it means people don’t have to worry about being turned away due to past financial difficulties. The latter also often means that rigorous controls are not likely to take place.
Another type of loan you may see advertised is no-fee bad credit loans. With this type of financing, the borrower will still have to pay interest on the amount borrowed. However, there will be no setup fees or additional charges such as administration fees. Therefore, these can often prove beneficial.
In outlining the various types of products on offer, we’ll start by looking at bad credit unsecured loans. If you don’t want to insure your property against the amount you’ve borrowed, bad credit unsecured loans are a good option. However, the interest charged tends to be higher than that charged for secured forms of loans.
Types of unsecured bad credit loans include those that require a guarantor. In this case, the guarantor is usually a trusted family member or friend who guarantees to take care of the refunds on your behalf if you don’t comply. Guarantors are generally required for people who have not had the opportunity to build a credit history; for example, parents often act as guarantors for their adult children.
Another type of unsecured financing is when repayments are collected from the house. These are known as home collection loans. The amount awarded is usually low (usually between £100 and £500). A representative from the loan company calls the home regularly to collect payments, which is usually once a week or once a fortnight. There are also several types of secured financing available for people with poor credit. Loans can be secured against your home, car, or other property. Also, payday loans are dependent on the borrower earning a regular income and the loan amount is repaid as soon as the borrower’s salary is credited to their account.
Even a visit to the lenders is a guaranteed form of financing. The borrower brings his assets to the lender, who lends him a sum of money based on the perceived value of the assets. The person then returns at some time in the future and returns the sum of money with interest in exchange for his assets, which have acted as security against the sum of money borrowed.
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