An Individual who has missed or made late payments on their credit agreement is likely to find it more difficult to borrow money. Adverse credit entries are registered with all three reporting agencies; this affects a person's creditworthiness for the next six years. It remains possible to get a secured or unsecured bad credit tenant loan, provided that your application is made to the right place.
Potential options include pawnbrokers, credit unions, doorstep lenders, logbook and payday loan stores. The rate of interest will reflect the risk posed to the lender; monthly repayments will be higher as a result of missed or late payments. It will normally only be possible to borrow money for a short period of time in order to ensure that the repayment is affordable to you.
Doorstep Lenders
Most bad credit tenant loans from a door-to-door lender are for between £50 and £500. Existing customers may be able to borrow up to £2,500 as they have established additional trust. The rate of interest on Provident Financial's doorstep loans - the biggest lender - is 189.2%.
- Mrs Smith takes out a doorstep loan of £300 at 272.2% APR over 52 weeks. This would involve making repayments of £10.50 per week and would accrue a total of £246 of interest over the full term.
Payday Stores
A customer may require a bad credit tenant loan that will see them through until they're next paid. A Payday loan doesn't normally involve a credit check, so it is perfect for individuals with an adverse credit history. Borrow money - up to £1,000 - but be aware that interest rates are usury.
Although it isn't uncommon to see advertised rates in excess of 1000% APR, the short duration of the loan means that they're an option for the cash-strapped customer. The money can be used for any purpose, but a job, full ID and a checking account are absolutely essential.
Pawnbrokers
A pawnbroker typically offers loans for between £50 and £300 based on the provision of collateral, such as gold or jewellery. Provided that you repay the money you've borrowed, the collateral is returned. If this isn't the case, the item will be sold to recover any money lent.
Auto Title Loans
Individuals that have already paid for their car may be eligible for a logbook loan. The interest rate is very similar to a Payday advance, but the amount borrowed is secured against your vehicle. The advantage of this approach is that it may be possible to borrow extra money.
However, failing to repay the money that you've borrowed is very likely to lead to your car being repossessed and sold at auction. Should this not cover the amount you owe the lender, you'll remain financially accountable for the difference on an unsecured basis.
Credit Unions
Unlike other lenders, Credit Unions operate purely for the interests of its members. Before a bad credit tenant loan is granted to an eligible member, a careful assessment will be made regarding affordability. The maximum interest is capped by law at 2% per month in the UK.
Individuals that have experienced credit problems in the past can still get a bad credit tenant loan, but the terms won't be as favourable. Check to see if a Credit Union is available as it could be possible to borrow money at a significantly lower rate of interest.
Asa Ghaffar - Asa has over 10 years of practical experience in loan approval, secured lending, bad credit repair, stock trading and debt management.
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