Over recent months the number of loans available on the market has dropped whilst the cost of borrowing has increased, and this has all stemmed from the global credit crunch that hit the nation last summer. Some groups have suffered more than others when it comes to being able to get affordable finance, and one of the groups to suffer most is those with damaged credit. Over recent years even those with bad credit have enjoyed relatively easy credit conditions, but the onset of the global credit crunch means that lenders are far more careful about who they lend to.

An unsecured loan is a loan that is based on contract, and often lenders will only consider those with a good credit rating for one of these loans. Unsecured loans are available from a wide range of lenders, but many people with bad credit may find that they are rejected for an unsecured loan because the risk to the lender is far greater, and in the current financial climate many unsecured lenders will not consider lending to those with damaged credit. However, there are one or two unsecured lenders that will consider those with damaged credit for an unsecured loan, although the interest rate charges on the loan is likely to be very high.

In many cases the most suitable and affordable option for those with bad credit who need to take out a loan is to opt for a secured loan. A secured loan is a loan that is secured against an asset, which is normally the home, which means that you will need to be a homeowner, usually with some level of equity in the property, in order to be eligible for one of these secured loans. Because these loans are secured the risk to the lender is not as great, and this means that more secured lenders will consider extending finance to those with bad credit. The interest rate charged will still be higher than on loans for those with good credit, and you need to remember that the loan is secured against the home, which means that you could end up losing your property if you default on your loan repayments.

If you are looking to take out finance on a shorter term basis just to tide you over for a while then you may find that a payday loan is more suitable. These loans are very short term loans, and need to be repaid in a month or so, although they can be rolled over for a fee. You can borrow small sums of cash, from around 100 to 1000 depending on the lender, your income, and your financial and employment status. There is no credit check with these loans, so there is no need to worry about rejection base on your credit rating. However, the charges and interest can be quite high.

Many people with bad credit make the mistake of turning to doorstep lenders and loan sharks in desperation, but it is important to bear in mind that these lenders charge extortionate levels of interest on their loans, and can make things very difficult in the event that you struggle to make the repayments.