A history of missed and late payments makes it far more difficult to get a bad credit installment loan approved than it used to be. This is because customers who have previously defaulted are far more likely to do so again in the future. Lenders don’t just perform credit scoring in order to decline customers, they regularly do so because they use a tiered lending structure. Cheap bank loans are offered to those individuals who are considered a minimal risk. Although a low APR loan for poor credit is now unlikely, it is still possible to borrow money with bad credit at a higher rate of interest.
Steps to Take Before a Bad Credit Installment Loan Application
Poor credit shows on a credit report for a period of not less than 7 years in America. In the case of chapter 7 bankruptcy, it shows for 10 years. That isn’t to say that a credit score remains constant throughout that timeframe because it doesn’t. There are a number of legal credit repair methods that can be used to rebuild credit ratings more quickly. Although accurately recorded adverse credit cannot be removed, there are things that can be done to improve a credit score. Prior to applying for a bank loan for bad credit, check for credit report errors and optimally redistribute revolving debt to get the best possible rating.
Low Cost Family Loans for a Bad Credit History
If in-between jobs or unable to offer the lender collateral, the most effective way to get the best loan rate is by borrowing money from a member of the family. The majority of close friends and family members will be prepared to offer an interest-free loan which makes it the perfect bad credit installment loan for those who are seeking to minimise repayments. The main problem is that default is likely to cause friction further down-the-line. If experiencing difficulty repaying a low cost loan, it is better to talk to that person rather than just hoping the situation will go away on its own.
Door Step Lenders Offer Bad Credit History Loans
It may be possible to get unsecured poor credit loan from a doorstep lender, such as Provident Financial. They offer small bad credit installment loans for up to £500 to customers and then collect payment each month for a defined term. The rate of interest is typically in the region of 270% per annum. With rising default rates, the rate of interest is unlikely to change in the near future. Beware of dealing with other credit sharks as their recovery practices are not only unscrupulous, they are also highly illegal.
Secured Bad Credit Installment Loans for Homeowners
In order to underwrite the risk of default, many lenders are still prepared to offer bank loans for bad credit that are secured against the properties equity. Home equity is defined as the difference between the value of a property and the mortgage loans, as well as any liens, that are secured against it. Customers can take out a standard low APR loan or second charge over a period of time that is as long as the mortgage itself. The main danger associated with a secured homeowner loan is that, failing to keep-up with the repayments, could lead to the repossession and sale of the family home.
Low APR HELOC Loans for Bad Credit Scores
A HELOC loan works in the same way as a secured bad credit installment loan in the sense that the customer borrows money against the available equity. However, it is a low APR credit facility which means that interest is only paid on the money that is used. It is a source of revolving debt, like a secured credit card facility. Due to the risk of foreclosure, default rates amongst borrowers are extremely low. This allows adverse credit lenders to offer very competitively priced low APR loans to potential customers.
Are Bad Credit Installment Loans Worthwhile?
Few lenders, other than payday lenders, offer poor credit loans because default rates are extremely high. Even person-to-person lenders, such as Prosper.com, have been forced to stop proving them due to legal action by investors. Aside from borrowing money from a member of the family, the only way to get a low APR loan is through the provision of collateral. The problem is that failing to keep-up with the repayment terms will result in the repossession and sale of the property in order to recover the money. It is important to think carefully before securing a loan against property, especially if already struggling with debt.