Guaranteed-Loan

Previously the word sub-prime was more commonly used in the United States while adverse credit or bad credit was the term used in the U.K. It was only as recently as the late 90’s that the word has become popular among brits.

Sub-prime lenders are individuals/companies who specialize in financing individuals whose credit history prevents them from being eligible for a loan from any mainstream financial institutions. The reason for a bad credit rating may range from the individual’s employment status, having a CCJ (County Court Judgment) or defaults to bankruptcy. Majority of the sub-prime lenders work in affiliation with the mainstream lenders under different names while only a few remain independent.

There are mainly two kinds of sub prime lending in the U.K. The first one is the door step lending and the other is sub prime mortgage lending. Door step lending involves lending small amounts for a short period of time which is them recollected by agents who visit the borrower either on a weekly or a fortnightly basis. Sub-prime mortgage lending on the other hand allow individuals to buy residential property. These mortgages are reserved especially for people with adverse credit ratings. Then there are other loan products like the sub prime car loans, sub prime credit cards etc.

Sub prime lenders generally charge higher interest rates in order to make their business profitable. The lower the credit score the higher would be the rate. Since the marketing costs are higher for a sub prime loan, the lending cost also becomes higher. While the interest rates of genuine sub prime lenders are only slightly higher, selfish lenders usually charge unreasonably higher rates. Such lenders also charge excessive late fees. Generally a good sub prime lender would offer reasonable services, answer to all your queries, be clear on terms and conditions and charge only a little higher than the prime lenders on interest rates, late fees and closing costs.

Some times many individuals who are qualified for a prime loan remain ignorant and thus apply for a sub prime loan. So, it is always good to do a comparison before you go for a sub prime loan. Also sub prime borrowers are not required to deal with taxes and insurances. Thus sub prime lenders have made available loans to a certain section of population that would have otherwise remained disqualified.