Credit Cards definitive guide.

There are a number of different borrowing options available to consumers these days. One type of credit that has massively grown in popularity over the past few years is the short term credit loan. This includes finance such as Payday and Cash Advance loans. You basically borrow the money for up to a couple of months and then you pay it back in full, plus interest. They can be really helpful in some circumstances. However, there may be a much better option available. One of them is the secured bad credit loan.

Secured Bad Credit Loans Vs Short Term Credit

Though bad credit loans are typically associated with high interest rates, a secured loan is slightly different when compared with a pay day loan. Most bad credit loans that are taken out are unsecured. This means that the lender has no guarantees that you will pay the money back. As the risk is higher, the interest rates are increased and that is why you end up with really high interest rates. With a secured loan you will typically secure it upon your home. This gives the lender peace of mind that you will make the repayments and the interest rate is therefore lowered.

Secured bad credit loans are also more reliable than unsecured loans and short term finance. They will usually be offered by reliable lenders. On the other hand with unsecured and short term finance, there are a lot of loan sharks out there that you need to be wary of.

Stella Creasy, part of the Labour government, has recently called for lending caps on legal loan sharks. She states that more help should be given to those who need short term finance. The current cost of short term finance can really spiral out of control due to high interest rates. In some cases consumers are paying back an astounding 10,000%. It is those with really poor finances who are targeted and lenders can get away with charging extortionate fees.

There are also short term finance lenders who target those who have just moved to the country. They will only accept people who speak more than one language. This makes immigrants high risk targets. When speaking of the proposed lending caps, Stella goes on to say:

“We have a range of products available from short term payday loans to more complicated higher purchase agreements. But due to the fact that there are no caps at all in our system, these rates can change from 271% to 4,000% more. None of these companies can provide pricing data to explain to me why they have arrived at these rates.”

Bad credit secured loans are not only more secure for the lender, but they are also helpful to the consumer too. You are more likely to think about whether you actually need the credit if you are risking your home to get it. Therefore a secured bad credit loan can actually promote responsible borrowing.

The amount that you can borrow will also differ between the two options. Secured loans will usually let you borrow up to £25,000. Short term finance on the other hand usually lends consumers up to £2,000. This is because the short term finance loan need to be repaid within a month whereas secured bad credit loans are repaid over a number of years.