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Tips for borrowing with bad credit loans

Applying for a loan of any kind is not a pleasant experience.

Just getting to the point of choosing a particular lender from the hundreds on the market can take hours of research and form filling. So if you're turned down by the lender at the last minute because of a bad credit history, the whole process has to start again but, this time, with another credit search against your file.

Many consumers with even a brief history of arrears or defaults can find themselves in a catch 22 situation. The more applications that are made, the harder it becomes to find another lender willing to consider your application for a bad credit loan.

There are an estimated one in five people in the UK with a bad credit history originating from mortgage arrears, ccj's, defaults and a range of other reason's which indicate to many lenders, particularly high street ones, that you are likely to be a higher linding risk.

So there emerges only two real ways to increase your chances of getting a loan with a history of bad credit. Both involve reducing the risk to the bad credit loans companies with security and increasing their potential return by paying higher rates of interest.

For borrowers with a bad credit history most lenders will require some form of security to reduce the risk of lending to you and this is most often the borrowers home. However, this should only be considered as a last resort and under independent guidance from a financial expert. If you default on the repayments of a secured loan you could lose your home.

Whatever type of bad credit loan you apply for it is vital that you understand your credit history and only apply to lenders who accept applicants with a poor credit history. Otherwise you risk repeated rejections and further damage to your credit rating.

One of the first steps you should make is to get a current copy of your credit file from one of the credit reference agencies that lenders use. Companies such as Experian will charge you ten to fifteen pounds to access your credit report and see what any lender will see when assessing your application. Check for any errors first then take note of the exact state of your credit history noting all negative markers.

Armed with this data you can then make a shortlist of bad credit loan providers that positively accept applications from those with these specific problems such as mortgage arrears and defaults etc. Research their criteria first before applying and speak to the lender to be certain that your history does fall within their lending criteria.

The idea is to gain access to credit as cheaply as possible and repair your rating with prompt payments and eventually full settlement. Once acheived, your rating will improve and give you access to cheaper borrowing when you need it.

Top Tips

TIP #1:
If you find it difficult to meet your repayments don't delay getting help. Contact your lender as soon as possible and get independent advice from the Citizens Advice Bureaux.

TIP #2:
Pay your monthly credit card bills using a direct debit to avoid late payment penalties.

TIP #3:
If you have a credit card balance you can't afford to settle, consider a 0% balance transfer card to save interest for 6, 9 or 12 months. Use the money saved to pay extra off your balance every month.