Poor credit loans are simply loans given to high risk borrowers who have bad credit. They will have picked up their bad credit rating if they were unable, at some time in the past, to maintain mortgage or loan payment. Even something as simple as an overdraft could cause a bad entry on your credit file. Because of the bad credit rating lenders are less likely to lend money as the borrower is considered to be too high a risk.
However, there are a group of lenders who can still provide loans to people with a bad credit rating. These lenders will consider all higher risk applications as long as the borrower is over 18 and is a homeowner.
Because of the perceived risk these loans for bad credit lenders will be charging a much higher interest rate. In some cases the interest rates from a good credit lender and a bad credit lender could be as much as 4-5%. As you can imagine that amount of extra interest will mean a lot more has to be paid off over the duration of the loan.
Plus, there are also sub-prime lenders who are a last resort lender if you are not able to get a loan from traditional high street banks or building societies.
So, given that your credit rating could greatly affect how much you repay on your loan you should try and improve your credit rating before applying for a loan. In fact the process of applying for a loan from a number of different lenders could also trigger entries on your credit file, which in turn could affect the decision of several lenders.
If it happens that you cannot make better your credit rating then make sure and carefully look at all the possible lenders as their interest rates can be very different. Do not be tempted to accept the first loan offered. And even worse, do not be tempted to accept a loan that you will have difficulty each month to repay as this could result in your credit rating even worse if you are unable to keep up with repayments.
