Adverse Credit Loans

Why do firms give money to bad risks?

A number of firms specialise in lending money to people the mainstream lenders won't. Adverse credit loans sound like a daft idea, but plenty of firms are proving that lending money to high-risk customers can reap dividends. If you've been refused credit by some lenders, others will welcome you with open arms.

Until recently, if you had a bad credit rating then you had two choices: give up, or go to your friendly neighbourhood loan shark. That's changed, and there are plenty of firms who deal in adverse credit loans. Some, like car finance firm Yes, even target their advertising specifically at bad credit risks.
On the face of it, adverse credit loans are financial suicide for lenders: people with bad credit records usually have a history of late payment or non-payment. However, when you look more closely it makes more sense: adverse credit loans usually come with higher-than-average interest rates and administration fees, and many firms' products are secured – which means if the borrower doesn't pay up, the lender can sell their house. As a result, the firms can't really lose out: if you keep up with your repayments, the bank gets a tidy sum in exchange for taking the risk of lending you money; if you don't, the bank flogs your house and gets its money anyway.

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