| People with bad credit history are likely to find it difficult | | | | loan, there's a risk that collectors may repossess them. |
| to get a loan from a high street lender. Thankfully, Loan | | | |  The repayment term would likely be |
| options are not limited to high street lenders. | | | | shorter. |
| If you've experienced credit problems such as defaults, | | | | Alternatives to unsecured loans |
| Mortgage arrears or other credit problems, you should | | | | Credit cards |
| consider bad credit loans; these are loans tailored to | | | | If you're unable to get a personal loan because of poor |
| people with poor credit and are subsequently less | | | | credit, you should consider credit cards for people with |
| stringent on requirements. | | | | bad credit; these also have a high interest rate but |
| Loan Options | | | | you'd only pay interest on the amount you owe. |
| 1. Secured loans | | | | Credit cards are also flexible; you can payback what |
| A secured loan is a loan for which you have to offer | | | | you owe sooner whereas loans normally have a fixed |
| some form of collateral. In the UK, collateral is usually | | | | term, you can also re-use money you paid back on |
| your home, although in smaller loans it can be a car or | | | | the credit card whereas loans do not allow you to do |
| other assets that you own. | | | | this. |
| If you're a homeowner, a secured loan is the best | | | | Secured loans |
| option simply because it would attract a lower interest | | | | Even if you're not a homeowner, there are other types |
| rate; your home (collateral) provides security to the | | | | of assets that a lender may accept as collateral; e.g. |
| lender therefore lowering the risk despite having a bad | | | | some lenders would accept cars as collateral for small |
| credit rating. | | | | loans. |
| 2. Unsecured loans | | | | What you can do to improve your situation |
| Also referred to as personal loans, these are loans | | | | One of the factors used to determine your credit |
| that are given without any collateral; the lender has to | | | | rating is your credit history; a credit history is a record |
| trust you as they risk loosing out should you default on | | | | of financial dealings in your past, missed payments, |
| the loan. | | | | defaults or similar bad dealings equate to blemishes. |
| The lender uses your credit rating to evaluate the risk | | | | Over time, you can make your credit rating more |
| of you not being able to pay back the loan, a poor | | | | positive by exercising good borrowing e.g. if you have |
| credit rating would make you a risk, coupled with a | | | | a credit card, mortgage or car loan, make sure you |
| lack of collateral, most lenders would view it as a high | | | | make your payments in time, do not go over the |
| risk loan. Those lenders that are willing to offer such | | | | authorised limit. |
| loans, charge very high interest to compensate the risk. | | | | Another factor in determining your credit rating is the |
| Other disadvantages of unsecured loans for people | | | | amount of debt you currently have; too much debt |
| with bad credit include: | | | | increases the risk of you failing to keep up the |
|  The amount you can borrow is relatively | | | | payments. |
| lower than on secured loans. | | | | The more you pay down your debts, the less of an |
|  Although the loan is unsecured, your assets | | | | effect this has on your credit rating. |
| are not completely safe, if you fail to pay back the | | | | |