The different types of bad credit
Bad credit loans are a good option for people who may have difficulty getting financing because they have previously had late payments or had a CCJ or default. There are a number of bad credit lenders now offering this type of financing, but you may be confused by the financial jargon that is used to describe loans that are specifically for this sector of the market.
Some of the terms that refer to loans that target this market sector are: bad credit loans no credit check and bad credit loans with instant resolution. The former is a useful option as it means people don’t have to worry about being turned down due to past financial difficulties. The latter also often implies that rigorous checks are unlikely to be carried out.
Another type of loan you may see advertised are bad credit loans with no fees. With this type of financing, the borrower will still have to pay interest on the borrowed amount. However, there will be no setup fees or additional fees such as administrative fees. Therefore, they can often prove useful.
In describing the different types of products that are available, we will begin by looking at unsecured bad credit loans. If you do not wish to secure your property against the amount you have borrowed, unsecured loans for bad credit are a good choice. However, the interest charged on them is usually higher than that charged on secured forms of borrowing.
Among the types of unsecured bad credit loans are those that require a guarantor. In this case, the guarantor is usually a trusted family member or friend who guarantees to make the payments on your behalf if you default. Guarantors are usually required for people who have not had the opportunity to build a credit record, for example, parents often act as guarantors for their adult children.
Another type of unsecured financing is when the repayments are collected from the home. These are known as collection home loans. The amount granted is usually low (usually between £100 and £500). A representative of the loan company calls the home regularly to collect the repayments, which is usually about once a week or once every two weeks. There are also different types of secured financing available for people with bad credit. The loan can be secured against a home, car or other property. Also, payday loans rely on the borrower getting a regular income and the loaned amount is paid back as soon as the borrower’s salary is paid into his account.
Even a visit to the pawn shop is a form of secured financing. The borrower takes his goods to the pawnbroker, who gives him a sum of money based on the perceived value of the goods. The person then returns at some point in the future and pays back the amount of money with interest in exchange for their goods that acted as collateral against the amount of money that was borrowed.
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