Can you Still Get a Secured Loan if you Have Bad Credit?

A bad credit rating will always make it more difficult to get a loan. However, because your home acts as collateral against a secured loan they are often much easier to get than an unsecured loan or a mortgage if you have bad credit.

British consumers are borrowing more than ever before. And as more people get into debt it is not surprising that many people are having difficulties keeping up with repayments.

Common causes of a bad credit rating are county court judgements (CCJs), mortgage or remortgage arrears, credit card arrears, defaults on loan or high purchase payments, or an IVA or bankruptcy. In recent years the number of people with a poor credit rating has increased significantly and financial institutions have recognised this as a growing market. Because of this many lenders have become more relaxed when it comes to giving credit to people with bad credit history, while some even tailor products specifically for them. While the recent global credit crunch has caused UK lenders to make their lending criteria stricter, it is still easier to get a bad credit secured loan than it was ten years ago. However, there are a number of factors to consider if you have a bad credit history.

Firstly, you may have to pay a higher interest on your secured loan product as the lender seeks to protect itself against the perceived extra risk. The proportion of your home's value that you can borrow, the 'loan to value' or LTV, may also be limited.

Before you apply for a secured loan take a close look at your personal finances. Make sure that you can comfortably keep up with repayments on the amount you borrow. If you have a bad credit score you will probably know that struggling to keep up with repayments is not a pleasant experience. Also, if you default on your repayments on your secured loan there is a very real possibility that you will lose your home. Be realistic about the amount you wish to borrow.

It is important that your application for a secured loan is not refused. All refused applications for credit are noted on your credit rating and could make it even more difficult to get a secured loan. Because of this, it may be a good idea to seek the advice of a broker or independent financial adviser that specialises in bad credit loans . A good independent broker or adviser should be able to assess your circumstances and tell you if you are likely to qualify. Often, they will also know where to go for the best loan deals.

The good news is that you should be able to get a secured loan even if you have bad credit. Because the loan is secured against your home lenders will have the peace of mind that they will be able to recoup the money if you fail to keep up with repayments.