Bad credit is a widespread problem in the UK. The number of people filing for bankruptcy is increasing. A bad credit history includes arrears, default, county court judgments, bankruptcy, etc. A bad credit history haunts the borrower for a very long time. It becomes very difficult to obtain a bad credit loan. Even if you manage to get one, the lender will charge a very high rate of interest. You acquire a poor credit score if you default in repayment of a loan or miss out on your regular payments.
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Bad credit loans are taken out by borrowers who have a poor credit score and are in an urgent need for money. Lenders are usually reluctant to offer bad credit loans because they consider you as a high risk borrower if you have a bad credit history. There are many lenders who offer bad credit loans, but at a high rate of interest. Therefore, you must compare the loan quotes offered by various lenders to get a bad credit loan at a reasonable rate of interest.
Before taking out a bad credit loan, it is always better to opt for a credit repair. Close down all your unused credit cards. This will prevent you from getting into the debt trouble in the first place. Take out a debt consolidation loan to consolidate all your high rate unsecured loans. Once you repay your debt consolidation loan, your credit score will improve. You can also talk to your creditor and explain him your inability to repay the loan. Your lender might come up with some kind of solution, which will help you improve your credit score.
If you believe that under no circumstance you will be able to repay your loan, then you can file for bankruptcy. Once you are declared insolvent, you will be discharged from all your debt obligations to give you a fresh start. However, this is not as easy as it looks. Your assets may be sold off to pay off your debt. Bankruptcy remains on your credit score for a number of years and you will find it very difficult to obtain a fresh loan during all these years.
Prevention is always better than cure. Try not to fall in the debt trap. Use your credit cards very cautiously and take out loans only when there is an urgent need for money. Take out only that much loan which you can repay comfortably.
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