If you have any kind of financial black marks against your name then you will find it significantly harder to get a loan. Whenever you apply for a loan the lender will carry out a series of credit checks to ascertain your credit history and your current financial status. There are various factors that contribute to a poor credit history and they range in severity depending on their frequency and chronology. One black mark on your record may not be enough to stop you from getting a loan but a combination of them will make things very difficult, though not impossible.

So what exactly contributes toward bad credit? Mortgage arrears are the most common occurrence and represent missed, late or under-paid mortgage payments. If these remain unsatisfied for a period of thirty days or more then they become defaulted payments which can lead in turn to an appearance at Crown Court. If the payment still remains unsatisfied after this hearing then the matter will be taken to County Court where it will be settled.

This will either be by a County Court Judgement, or CCJ, being placed in your credit file or, if the amount is paid and the debt satisfied, a satisfaction certificate. Satisfaction certificates at least demonstrate that payment has been made, albeit tardily, whereas CCJs mark you down as an unreliable borrower for a long time to come. The other factor that could give you a poor credit rating is bankruptcy. An ex-bankrupt is freed from their financial obligations after a certain time period but it still shows up on their credit history, making many lenders reticent about doing business with them.

Like any industry where there is potentially a great deal of money to be lost lenders do not like to take undue risks and if you have a bad credit history the probability is that you will become a sub-prime candidate for a loan.

However this does not mean that there isn't any possibility of achieving a loan whatsoever. It would be highly unlikely that you would qualify for an unsecured loan as the lender would be laying themselves open to abuse from somebody who is a known liability. Lenders are simply not that trusting or naïve. But if the lender has some form of insurance against an individual with a poor credit history then the risk involved is substantially lowered and this is why a secured loan is the best bet for somebody with adverse credit.

If you are a homeowner then you should not have too much trouble in getting a secured loan. This is because the lender will use the borrower's property as collateral and security against the borrower defaulting on repayment. Putting your home on the line demonstrates to the lender that you are serious about the loan and aware of the consequences should you default.

This is unlikely to be enough however. Whilst there are the aforementioned risks to the lender in dealing with someone with poor credit there is also much more potential for making money out of them. It is an incontrovertible fact that lenders will charge substantially higher rates of interest (or APR) to those with bad credit. In most cases this is fair enough considering the borrower's history and the accompanying level of risk, but there is a sub-industry of more disreputable insurance firms out there who prey on those struggling to find a loan. They will offer deals that sound too good to be true and this is because they are. Hidden in the small print will be incredibly exploitative clauses and wildly over-inflated interest rates specifically designed to bleed you dry. With these kinds of ‘loan sharks' it is perfectly possible that you will end up losing your property. The vast majority of lenders are legitimate and fair but it pays to keep an eye out for these rogue firms.

As well as being a means to an end taking out a secured loan is an opportunity to demonstrate that you have changed your ways and boost your credit rating. If you are upfront and honest about your situation and can show that you are more financially responsible than you have been in the past then your application should go relatively smoothly. If you can prove that you are able to repay the loan punctually and accurately over the designated period then your bad credit history will gradually give way to a more positive reflection on your new, reliable status and make it much easier to get a loan (maybe even an unsecured one) in the future.

There is no getting away from the fact that adverse credit is detrimental to getting a loan but it does not mean that it is completely impossible. Secured loans are the best option for people with a poor credit history and, if the lender is satisfied with the borrower's behaviour in repaying the amount, can greatly improve their credit rating.

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