An unsecured loan bad credit history is a type of loan offered without any collateral to people who have bad credit history.
Bad Credit History
Bad Credit History is a term used to describe borrowers who have poor performance measured on the basis of a borrower’s debts and payments during the previous 7 to 10 years, loan amount, any legal proceedings etc.
In UK, one in four people have some or other form of bad credit history. This bad credit history is caused due to various factors-It may be caused due to a county court judgments (CCJ) against your name. You could get a CCJ for something as trivial as missing payments on a CD or book. A borrower may have a bad credit history due to late or missing of a mortgage payment. It may also be caused due to partial payment. Missing payment due to non-availability of funds in borrower’s account is a very common factor of bad credit history. There are approved credit reporting agencies who gather such information about borrowers, verifies and assesses gathered information and develops the credit report, for a fee.
This report carries a three digit number known as a ‘Credit Score’. The credit score indicates whether the borrower has clean credit history, poor credit history or bad credit history. When a borrower with bad credit history applies for a loan to a lender, the lender makes out the risk element in lending to this particular borrower through the borrower’s bad credit history record. Due to the very obvious risk associated in lending to this borrower, lenders hesitate in lending to such borrower. The result is the rejection of loan application of such borrowers.
Unsecured loan bad credit history
The cause of bad credit history may be beyond the control of borrower or simply the cause, say late payment, may be the first and last factor or the borrower might have made partial payment unintentionally. This doesn't mean you are always going to default on your loan repayments. Such causes of bad credit history do not hamper the borrower’s repayment capacity and there are several lenders who recognize this fact and so even if you have bad credit history, it does not mean end of the world for you.
There are lenders who have developed unsecured loan schemes for people with bad credit history. In case of unsecured loans, the lenders do not ask borrowers to offer any asset as security against loans offered. Lenders rely on borrower’s profile, evaluated through information such as employment history, income level, recommendations, final payment of any previous loans etc. However, if a borrower defaults on an unsecured loan, the lender has no priority claim against any particular property of the borrower. The lender can try to obtain just a money judgment against the borrower. In such loans, the risk element is the highest, which is validated through bad credit history and no collateral. Such lenders compensate their increased risk by offering lower amount and by charging a little higher interest.
Loan amount in an unsecured bad credit history loan is decided on case to case basis, which means loan amount depends on borrower’s profile. Similarly, rate of interest to be charged also varies according to borrowers’ profile. Usually, loan amount remains in-between £7,500 and £75,000 which is repaid over a period of between 5 years and 25 years. Therefore, the key features of an unsecured bad credit history loan are:
Variable rate of interest, depending on borrower’s profile
Loan amount also depends upon monthly repayment capacity
Usually, no up front fees
No collateral required
Borrow from £7,500 to £75,000
Repayment period in between 5 years and 25 years
Least documentation
Fast Processing
Purpose of Unsecured Bad Credit History Loan
Simply for anything-That means it totally depends on the borrowers choice of the purpose of spending money. It could be:
· home improvements
· to fulfill short fall while purchases that dream car or boat
· that once-in-a-lifetime holiday
· repaying credit card or other debts to reduce your monthly outgoings to a more manageable amount
