Bad credit loans are designed to offer flexible borrowing opportunities to those who have previously been turned down for credit due to CCJs, arrears or simply having a poor credit history due to missed or late payments.

Loan providers see lending to people with a poor credit history as a risky investment, so the majority of lenders only offer people in these circumstances secured loans.

What are secured loans?

Secured loans mean the amount borrowed is secured on the applicant's property or another valuable asset - because of this poor credit loans are usually only available to homeowners.

Lenders prefer secured loans as they provide protection for their investment. If the borrower doesn't meet repayments over an extended period, providers can repossess the property to reclaim their funds.

What interest rates can you get?

Lenders that offer loans for bad credit will still check your credit score to determine whether they will lend to you, as well as the interest rate they will offer.

The interest rates offered to those with a poor credit history tend to be significantly higher than those advertised on the high street.

However, the actual interest rate offered to each individual depends on the amount borrowed (with larger amounts tending to attract lower interest rates) as well as the personal circumstances of the applicant.

Those with a better credit history are likely to be eligible for a lower interest rate than those with a poor credit history as they are more likely to meet repayments.

What about unsecured loans?

Because providers need to protect their investment, unsecured loans for people with bad credit tend to be hard to come by.

Most unsecured loans will have higher interest rates than loans that are secured on property especially when applying with a poor credit history. .

In many cases unsecured loans for poor credit will be provided by brokers who have access to lots of plans enabling them to find the lowest rate that fits your personal circumstances.

When looking to take out personal loans bad credit can make it feel like you have no option but to accept whatever you are offered. Regardless of your financial circumstances it is important to be mindful of lenders charging very high interest rates.

What next?

The majority of bad credit lenders place little restriction on what the borrowed funds can be used for.

Whether you want to consolidate your existing commitments into a more manageable monthly amount or buy a new car, you should be able to do so.

Additionally, some lenders offer features such as optional repayment holidays and low early repayment charges, possibly waiving them altogether.

By comparing quotes from different bad credit loan providers you should be able to find a loan plan that is right for you.