Cheap Personal Loans for Bad Credit UK
It can be a difficult choice if you are faced with trying to find cheap personal loans for bad credit in the UK.
Maybe you had a problem with a previous loan, a payment didn’t get through and you ended up in problems. Or maybe you have been the victim of identity theft with someone unknown to your racking up debt and leaving you with a bad credit reference. Whatever the reason, many people have fallen foul of the bad credit score trap. Fortunately, there are lenders who will provide finance despite the bad credit reference.
Cheap Personal Loans for Bad Credit UK
Unfortunately, many of these lenders will probably charge more interest than if you had a good credit score. This is just something you may have to live with. If you need a cheap personal loan for bad credit in the UK then its likely you will only be able to obtain a secured personal loan. This type of loan requires that you provide security (usually property) in order to assure the lender that the loan will be repaid. If you are unable to repay the loan then the lender will have the right to reclaim the loan against the security you have provided. Obviously if this is your house, that has quite serious implications.
However if you are genuine about finding a bad credit personal loan then this shouldn’t be a problem. If you intend to make your payments on time and see it through until the term of the loan then the security aspect may not be a problem to you.
Either way, its important to consult several lenders to see what options are available to you. Depending on you actual credit score, the interest rates may vary considerably between one lender and another. Making sure you find the cheapest personal loan possible is all about shopping around to find the best interest rate.
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Finding the Cheapest Personal Loans
Finding the cheapest personal loans is all about understanding what factors make a loan expensive or cheap. Usually, the loan that could be identified as the cheapest will be the loan with the lowest interest rate.
When talking about loans, the interest rate is usually termed the “Annual Percentage Rate” or APR. At its simplest, the APR is basically the interest rate payable over a yearly period divided by the number of payments due in that year.
Currently, the lowest APR rates to be found in the UK are between 7 and 8% but this will vary depending on the current bank interest rate set by the Bank of England. If the Bank of England increase the base rate, then most lenders will also raise their lending rates.
Cheap Personal Loan Reviews
From this is easy to identify a loan which is say 10% APR will cost more over the duration of a loan which is 8% APR providing the loan is paid back over the same term. The reason for this is that naturally more interest will be accrued if the loan is taken over a longer period of time.
At its simplest, calculating your monthly payments should be a matter of dividing the APR by twelve to get your monthly interest fee then applying this to the loan:-
- Loan Amount: £1000
- Loan Term: 12 months
- APR: 10%
- Monthly interest rate: (10 / 12) = 0.83%
- Monthly interest: £8.30
- Monthly payments: (£1000 / 12) + 8.30 = £91.63
- Total repaid over 12 months: £1099.56
Unfortunately, the above example can only be used as an idea of what you might expect. The real amount is likely to be a little higher due to the effects of ‘compound’ interest. This is a term used to describe the interest that is charged to interest that’s all ready been added to the loan. However, the above example can work to give you a basic idea. Most lenders do have loan calculators on their websites which help you to get more exact figures.
Overall, finding a cheap personal loan will be about looking for the lowest interest (APR) payable. There are several ways to check this:-
- Browse lenders websites
Most lenders have a website with easy to use loan calculators and often clear advertised APR rates - Look at comparison websites
There are a number of comparison sites which help to put lenders rates all on one easy to view page. This can help to more easily compare the loans available. - Visit high street banks and building societies
You can of course visit high street lenders or call them to enquire about their loan rates
Whichever option you find best, finding the cheapest personal loan is essential to avoid paying more interest than is necessary on any borrowing you wish to make.
