Those with a good credit record do not need to worry when taking out a loan as they will have access to reputable lenders. The situation is more risky, however, if you have a poor credit history. This article looks at the key things to think about when looking for credit.
What to look for in a lender
Most of the loans that are taken out in the UK are with reputable money lenders who specialise in providing credit and who are registered to do so. If you have a poor credit history, however, the number of lenders who will lend to you will be limited.
There is a specialist market offering loans to those with a less-than-ideal credit record. Unfortunately, high-risk borrowers tend to attract high-interest loans. It is still important to shop around as rates do vary between different providers.
It is also a good idea to stick to well-known comparison websites and loan companies. Lenders should be able to give details of their registered address, confirm their registration with the Office of Fair Trading and have a clear complaints policy. It is also worth carrying out some research online and looking at reviews about the service provided by different companies.
What to avoid
If you’re looking for honest loans there are a number of things that you can look out for to prevent yourself from getting scammed. Avoid companies that say you’ve been pre-approved for a loan. A genuine loan company will carry out checks to ensure that you can repay the money before they will offer you a loan.
Never, under any circumstances, provide a loan company with an upfront payment. This simply would not happen if the loan were from an honest provider. You should also become suspicious if the loan application process involves transferring money.
Unfortunately, it is usually those who are struggling to obtain credit from bona fide loan companies who are targeted by loan sharks. Unregistered money lenders should be avoided at all costs as it is likely that there will not be any official agreement in place and the lender will charge you whatever interest rate he feels like on a given day. You could also be at risk of intimidation or violence if you miss a payment.
If your circumstances are such that you are unable to access a loan from a reputable company, you should seek help elsewhere. If you have claimed for Job Seeker’s Allowance and this has been refused or your benefit has been stopped, you may be able to claim for Hardship payments. Check with your local Job Centre or seek advice from the Citizens Advice Bureau. If you already owe money and are struggling to repay it you may want to seek help from a debt charity such as National Debtline or Debt Support Trust.
When taking out a loan, particularly if you have a poor credit history, it is important to play it safe. It is worth remembering that with genuine loans there is mutual benefit as is not just the loan provider who is doing you a favour by lending you money. You are doing them one too. After all, you will be repaying the capital that they lent you plus interest and they will, therefore, profit from the deal.