Money Articles

Bad credit loans - otherwise known as poor credit loans or sub-prime loans - are loans made available to borrowers who, for one reason or another, have a credit rating that is too low to qualify for a loan from the traditional banking community. A poor credit rating may not necessarily be the result of financial mismanagement or malpractice in the past; young people, those without any credit history at all, those recently divorced, or made redundant, may find that they have a poor credit rating. A history of defaults on previous loans, etc. and/or County Court Judgements (CCJs) against a borrower will, however, significantly reduce his, or her, eligibility for a loan by traditional means.

Bad Credit Loans

The providers of poor credit loans - often lenders specialising, solely, in this type of loan - are considered to be exposing themselves to higher levels of risk than conventional lenders, and this is reflected in the interest rates that they charge. This is particularly true in light of the so-called "credit crunch" and the continuing uncertainty in global financial markets. Whilst it is still possible to find bad credit loans, you are likely to find that the range of products is limited, and interest rates are high, compared to those that were previously available.

That does not mean, however, that you should be paying an extortionate amount of interest on a poor credit loan, and do be wary of verbal "guarantees", and up-front fees. You may find that overzealous - or occasionally, unscrupulous - salespeople promise you a loan, at a certain APR ("Annual Percentage Rate"), only to renege on that promise once the fee has been paid.

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