What is an unsecured loan?
As the name suggests, unsecured loans are finance agreements that aren’t ‘secured’ against any asset. This means if you default on payments you won’t run the risk of having the asset (for example your car) taken from you in order to repay your debt. This makes personal loans a less risky form of borrowing in comparison to other finance options.
Another benefit is that with an unsecured loan you’re not limited to where you can buy your car from. You can shop around for deals and may even be able to get a brand new or nearly new car. These options might not be available to you otherwise with a bad credit history.
Unsecured loans may carry larger interest rates than other types of car finance. This is because there is a higher risk to the lender in the event you default on the monthly repayments.
Unsecured loans for bad credit customers
If you have a bad credit history then you might not be eligible for a personal loan. If you do get approval it’s likely that the interest rate will be considerably higher than other finance options.
However, although you won’t risk the repossession of your personal assets, there can be serious consequences to not repaying. The lender can still take serious steps to collect the debt. This means you could face late payment fees, CCJs or other charging orders and potentially debt collectors on your doorstep. These will all have a negative effect on your credit file and can harm your chances at future loan approval.
HP (Hire Purchase) is a type of car finance option that may be suitable for people with a poor credit history. Bad credit car finance specialists such as Red Potato focus on providing HP finance for people who have had financial struggles.
As long as you continue to make your monthly payments on time you won’t run the risk of losing your car. In addition, you will also have full ownership of the vehicle once all payments due under the agreement have been made. We base our lending decisions on your current financial circumstances and your ability to repay the loan.
We offer finance from 19.9% APR to 29.9% APR. We will confirm the APR you are eligible for when we provide you with a lending decision. The APR you are offered is subject to our underwriting checks once we have received your documents and completed our affordability checks.
Representative example: Loan amount of £7,500 with a monthly repayment of £191.63 over a term of 60 months at a rate of 10.66% interest per annum (fixed). This is equivalent to 19.9% APR representative. Interest repayable is £3,997.80 with an option to purchase fee of £10.00. Total amount repayable is £11,507.80.
Choose an affordable loan option for you
Affordability should be one of your main concerns when you apply for finance if you have struggled financially in the past. Whatever type of loan you choose, you should make sure that the monthly payments are affordable for you throughout the term of the loan. If you know you will struggle to make your monthly payments you should look to improve your credit score in the long-term to get a better interest rate.