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Bad credit loans are a good option for those who may find it difficult to get finance because they are past due payments, or have CCJ or defaulted. There are many bad debt lenders who now offer this type of finance but you may be confused by the financial jargon that is used to refer to loans that are specifically for this sector of the market.
Some terms that refer to borrowing aimed at this market segment are: bad credit loans with no credit check and bad credit loans with instant decisions. The former is a useful option because it means people don’t have to worry about being turned down because of past financial difficulties. The latter also often means that rigorous scrutiny is unlikely to be done.
Another type of loan that you may see advertised are bad credit loans with no fees. With this type of finance, the borrower still has to pay interest on the amount borrowed. However, no additional charges like set up fee or administration fee will be levied. That’s why they can prove beneficial at times.
In describing the different types of products offered, we will begin by looking at unsecured bad credit loans. Unsecured loans for bad credit are a good option if you do not want to secure your assets against the amount you borrow. However, the interest charged on them is higher than the interest charged on secured forms of credit.
Among the types of unsecured bad credit loans are those that require a guarantor. The guarantor in this instance is usually a trusted family member or friend who guarantees to make payments on your behalf if you fail to meet them. Guarantors are usually required for people who have not had the chance to build a credit record, for example, parents often act as guarantors for their adult children.
Another type of unsecured finance is when repayment is collected from the home. These are known as home collection loans. The amount awarded is usually small (usually between £100 and £500). A representative of the lending company makes regular calls to the home to collect repayment, usually once a week or once a fortnight. Various types of secured finance are also available for people with poor credit history. Loan can be taken against house, car or other property. Additionally, payday loans depend on the borrower earning a regular income and the loan amount is repaid as soon as the borrower’s salary is credited to his account.
Even going to moneylenders is a form of secured finance. The borrower takes his goods to the moneylender who lends him a sum of money based on the estimated value of the goods. The person then returns at some point in the future and returns the sum of money with interest in exchange for their goods, which have acted as security against the amount borrowed.
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