Unsecured Loans For Tenants With A Poor Credit Rating
If you're a tenant and you're looking to raise some finance, the fact that you are reading this article could mean that you may have already experienced some problems in borrowing the money. Unfortunately, it is an all too familiar situation these days as you could be forgiven for thinking that the financial institutions are biased towards homeowners.
Well, you may be partly correct in that assumption. For a lender, their profitability comes from the interest rate they charge their borrowers and the length of the term. So the higher the interest rate, the higher the amount borrowed and the longer the term, the more money they make from the deal.
With a secured loan, they can expect that their risk is comparatively minimal since if the customer defaults, then the lender can foreclose on the loan and reclaim their money from the proceeds of the sale of the asset on which the loan is secured which is normally the borrower's home. If the lender sets the loan to value at less than 100%, then they are pretty much guaranteed of getting their money back in such a situation. In this way, secured loans can provide a vehicle for the customer to borrow comparatively high sums of money. Typically in a range from ?5,000 to ?250,000.
Unsecured loans are very different in principle from secured loans. As the title suggests, the loan is not guaranteed against an asset. If the borrower defaults, then although the lender will always have some recourse in law for the return of their money which could involve the seizure of some or all of the customer's property, it is a far less attractive proposition for the lender in this situation. Their costs of recovery are likely to be high as solicitors and bailiffs are expensive.
This points lenders towards dealing with less risky deals. Unsecured loans and tenant loans to people with a poor credit history, littered with arrears, defaults and CCJ's do not bode well for a lender looking to realise a good return on their investment. From the borrowers perspective, it is always a wise move to look after your credit rating by ensuring that you do not default on your repayments, as any prospective lender will be able to view this record when you approach them for your next loan.
That said, there are many people looking for unsecured loans and tenant loans who have a poor credit history and who may still be successful in their application. Over the years, lenders have developed new product ranges and evermore sophisticated ways of monitoring your repayment performance and can judge when you are about to default, giving them the time to react and resolve the situation almost before it happens. There are still many situations where borrowers default on their unsecured loans and tenant loans and the rise in debt management and IVA cases would seem to support that point.
If you are renting your home then unsecured loans and tenant loans may offer you a way to arranging the finance you need for you to enjoy the nicer things in life today. Of course, it may well be much easier for you to successfully apply if you have a squeaky-clean credit history but if you do have a poor credit rating, don't despair as it is not necessarily the end of the world. You may still find lenders willing to help.
Applying for a loan is relatively easy. Just fill in the enquiry form on an online finance broker's site and sit back and relax. You should receive a call from a loan consultant in a few minutes and a decision in principle almost immediately. You will still need to complete and return a written credit agreement but this should only take a couple of days to turn around so you could receive the money in a week or two.
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Andy Silk is FinanceGuru for FeelGoodLoans.co.uk, specialists in unsecured loans for tenants, loans and mortgages for UK homeowners and business owners.
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