A secured loan for bad credit is the same as a standard secured loan, except that it's designed for people with a poor credit history.
Secured loans are sometimes known as second charge mortgages or homeowner loans, because they are often secured against your property – although, in truth, they can use any valuable asset as security. This could include your car or a motorbike.
If you can't pay back the loan, the lender has the right to take possession of whatever you've put up as security, then sell it to recover what you owe.
The amount you can borrow will depend on your property value, income, and financial circumstances, but secured loans can be for anywhere between £1,000 and £2.5 million.
But if you have bad credit, it's likely that you won't be able to borrow as much as you could with a good credit score.
This is why, unless you need the money urgently, it may be worth working on improving your credit before opting to get a secured loan.
If you have bad credit, it's likely that you won't be able to borrow as much as you could with a good credit score."
The short answer is yes, in fact it's often easier to get a secured loan with bad credit than a typical personal loan because the lender has something to back up your promise to repay with.
That means secured loans for bad credit are available to people who have:
County court judgements (CCJs)
Other missed credit payments
Secured loans for bad credit usually come with higher interest rates and fees than are available to people with a good credit score, so they're typically more expensive. They also mean the asset you are securing them against is at risk if you fail to keep up payments.
This means that in some cases you may be better off raising the credit you need with a bad-credit credit card or work on improving your credit and get a personal loan, where your home or other asset is not at risk.
In many cases, yes. That’s because the majority of lenders only work through brokers, so you can’t directly apply to them for a secured loan.
There are advantages to using a broker though. Firstly, they’re often able to provide an indication of the likelihood of your application being accepted before you apply.
As well as checking your circumstances – including any potential problems with credit – a good broker can also help you track down a loan suitable to your specific needs.
A good broker can help you track down a loan suitable to your specific needs."
A poor credit history means you’re already financially vulnerable, so it’s important you understand how serious a commitment it will be to take out a bad credit secured loan.
With this in mind, make sure you:
Don’t borrow more than you need
Understand how long you’ll need to pay the loan back
Can afford the monthly repayments on top of your regular outgoings
It’s also a good idea to check your credit record is both up to date and accurate before you go hunting for secured loans for poor credit – even if you’ve not previously run into problems.
Yes, you will always be credit-checked when you apply for a secured loan. This is why you may wish to use a broker to conduct a soft search that verifies whether you will be accepted for the loan you want before formally applying. Soft searches don't affect your credit record.
In most cases, the money will be transferred to your account 10 working days after you make your application.
No. Although most secured loans are only available to people who own their own home, some lenders will let you secure the loan with other assets – such as a car or motorbike.
Your property will be valued as part of the loan process. This is typically arranged by the lender and paid for by you. The valuation is carried out by a chartered surveyor.
Generally, yes. But doing so will cost you. While quite a lot of lenders allow for early repayments, the ones that do often impose an early repayment charge for doing so.
When you take out your loan make sure you check the terms and conditions to find out what the early repayment rules are.
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