If you have a bad credit rating and need to borrow a substantial amount of money you might be thinking of applying for a secured loan bad credit considered. Lenders are more likely to consider offering a larger loan with something secured against it but it does come with a risk. Here we are going to look at what you need to think about if considering a secured loan.
Things we are going to look at include:
- What a secured loan is;
- What the risks of a secured loan are;
- What the advantages of a secured loan are;
- What are the disadvantages;
- Other loans you might consider as alternatives.
What is a Secured Loan?
Have you stopped and really considered what a secured loan is? We are asking this because it is not a loan that should be rushed into so it is important to understand what is involved with such a loan.
We understand that if you have a bad credit rating finding a loan offering a large sum of money is going to be difficult and it can be tempting to sign on the dotted line without really thinking too much about it if the lender offers a loan.
A secured loan is a loan that requires you to put something up against the money being borrowed and this is usually your home.
The Risks of Taking out a Secured Loan
The biggest risk to a secured loan bad credit considered is that if you fail to make the monthly repayments on the loan you are at risk of losing your home.
Often secured loans are taken out over a number of years and sadly, you cannot guess what might happen in the future. If you become unemployed for any reason and cannot meet the repayments the lender could take you to court to seek possession of your home.
Advantages of a Secured Loan Bad Credit
There are some advantages to secured loans and millions of people in the UK do take out such a loan. The advantages include:
- You may be able to borrow a large sum of money even with a poor credit rating;
- You can spread out the monthly repayments over many years to keep the cost down each month;
- The interest rate may be lower with a secured loan than an unsecured loan;
- You can borrow money for any reason.
Disadvantages of the Loan
The advantages of a secured loan have to be weighed up against the disadvantages and these include:
- The interest rate you see advertised may not be the one given so you may have to pay a higher rate. Lenders usually show the representative APR;
- A variable-rate APR will not allow you to budget as the interest rate could go up over time and this could end up making the loan unaffordable;
- If you want to borrow the money to pay for white goods or a vehicle, you may be paying the loan a lot longer than what the purchase lasts. Vehicles do depreciate over time;
- Loans of this nature may have an early repayment fee attached to it. This means if you can pay the loan off early you would incur a fee;
- You are going to be tied into a secured loan for many years and have to meet the monthly repayments over this time;
- You may be better off considering an alternative loan, such as a guarantor loan.
Therefore, before rushing in to take out a secured loan you do have to weigh up the advantages, disadvantages to the loan, and consider other options.
Alternatives to Secured Loans
A secured loan may be one choice of loan if you need to borrow a large sum of money and you have a less than perfect credit rating but there may be other options more suitable.
Guarantor Loans for Poor Credit
Another type of loan that lenders may more likely approve for people with poor credit ratings is a guarantor loan. Whether this loan is suitable is going to depend on how much you want to borrow of course.
With guarantor loans lender are more likely to offer larger sums as you do need to get someone to stand as your guarantor. However, you do not need to secure anything against the loan.
If anything goes wrong and you find you cannot afford to repay the loan, the guarantor is expected to stand up and take over the loan repayments. With a guarantor by your side, you are seen to be less of a risk.
A personal loan is another type of loan that does not require you to secure anything against the loan. This type of loan also does not need you to ask someone to stand as a guarantor.
With these points in mind, it is more difficult to find approval for a personal loan than with a guarantor or secured loan.
Finding Affordable Loans Online
One of the easiest ways to find lenders who are willing to offer loans to people with poor credit is to look online.
We are not lenders ourselves; instead, we work to match those looking for loans to lenders who are willing to offer people with poor credit ratings a chance to borrow.
We work with a panel of lenders who will consider verifiable income when you apply for a loan. This means that while they will check your credit rating, lenders will also consider the fact that your circumstances might have changed and you can afford the loan. Lenders will want to know how much money you have coming in and going out each month. This gives them a good idea as to whether the loan is affordable for you.
We can help to match you up with lenders offering a range of loans with competitive rates whether you are looking for a secured loan bad credit considered a personal loan, guarantor loan or any other type of loan.
Here are some other interesting articles from out website:
The Ultimate Guide to the Best Secured Loans for Bad Credit
Apply Now for Small Loans For Bad Credit With Us