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Subprime Loans[edit]

A sub prime loan is a loan for an individual with a bad credit history. If you need a sub prime loan you may have CCJs or defaults, and you may have failed to repay previous credit cards or loans off on time. Sub prime loans are availiable for a verity of reasons. Sub prime car loans, sub prime debt consolidation loans and sub prime home improvement loans are all available but will cost more than good credit loans and high street loans.
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What is a subprime loan

A sub prime loan is usually described as finance that is accessible to people who would not usually be able to get finance. Essentially, sub prime loans are bad credit loans.

This could include: young people, people discriminated against (people on benefits or job seeker's allowance), people with a small amount of money in the bank, people with a bad credit history, people with no credit history, people with a low income, people that may have had county court judgements, defaults, late payments, arrears on loans, or if there is evidence to suggest they have a reasonable chance of defaulting on the repayment, etc.

They are usually offered at a higher interest rate that is above the interest rates offered to prime borrowers. Sub prime borrowers are usually turned away from traditional lenders due to their “risk” levels. If you take out a sub prime loan and make the repayments as agreed on the credit agreement, they can help you rebuild your credit. If you do not make the repayments as agreed, sub prime loans can totally ruin your credit history.

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Types of sub prime loans

Payday loans – small, high interest, short-term loans that are intended to cover your expenses until your next payday.

Logbook loans – an asset-based loan secured on your car. The lender holds onto the car's V5 registration documents until the loan is paid back in full.

Peer to peer loans – a personal loan where members of the public lend to other members of the public. This loan will not involve any banks or other financial companies.

Doorstep loans – a personal loan where the cash is delivered to your home by one of their locally employed agents. Loan repayments are also collected from your home.

Credit Unions – a financial institution that is owned and controlled by its members, usually restricted by a local area or a work community. They are not for profit so they are able to offer sub prime loans to their members as they base their lending decisions on proven savings history.

Text Loans – enable you to text them to request the loan be deposited into your bank account instantly. They usually only offer a really small loan amount for a really short time.

Pawn brokers – secured loans, with personal items used as collateral, interest rates are not as high as other sub prime lenders as it is a secured loan, they can sell your items if you do not keep to the terms of the loan.

Guarantor lendersbad credit loan that requires a guarantor - somebody that will back your application and promise to make repayments if you are unable to. The guarantor will have to have a good credit history but the applicant can have bad credit.

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Advantages of a sub prime loan

  • Acceptance criteria is less strict
  • Great source of finance for people who may have had defaults, county court judgements or the unemployed
  • They can help you rebuild your credit if you repay on time and keep to the terms of the loan agreement
  • They can actually provide you with money when you need it
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Disadvantages of a sub prime loan

  • Interest rates tend to be very high
  • They are quick to refer you to debt collection agencies if you miss a repayment
  • Loan terms are typically very short which means you have to pay it back over 6 a maximum of months
  • It can totally ruin your credit if you do not stick to the loan terms
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Things to watch out for with sub prime loans

  • Payday loans – extremely high charges if you miss a repayment or default on your loan
  • Logbook loans – your car will get repossessed and sold if you miss repayments or default on your loan
  • Peer to Peer loans – you will be referred to a debt collection agency quickly as the money you are borrowing is the money of other individuals just like you
  • Doorstep loans – if you miss repayments or default on a loan.
  • Credit Unions – they take it very seriously if you miss repayments or default on your loan as you are borrowing the money of other credit union members. You may never be able to get a loan with them again.
  • Text Loans – charges are ridiculously high and applied very quickly if you do not pay the loan back on the date agreed
  • Pawn brokers – they will sell your items on if you do not repay the loan
  • Guarantor loans – ensure your guarantor knows exactly what they are getting themselves into because they could get themselves into trouble financially

See all Subprime Loans

Example Loans:

QuickQuid

1734%APR

Bristol Finance

365.1%APR

Cash Genie

2339%APR

Speed-e-Loans

1849%APR

Money in Advance

1413.1%APR

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