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Poor Credit History - Which Is Best, A Credit Card Or Personal Loan?

Aug 17, 2007
There was a time when poor credit meant you could kiss any chance of getting credit good-bye. Credit cards were extremely difficult to get if you had any kind of compromising information contained in your credit report. These days have long since passed. Today, if you have bad credit, there is a whole range of options open to you for sources of credit.

From personal loans, debt consolidation loans and credit cards, they are all now available in one form another to borrowers with a poor credit history. The thing you will have to remember however is that they come with different terms and are offered with different conditions than ordinary credit.

Typically, lenders who wish to increase their share of the market will search out new groups of customers who they can sell their product to. The bad credit segment is one area that lenders have begun offering most of their services on a large scale where before they did not. They simply assess the extra risk involved in lending to this group and then make sure that they charge correspondingly higher to compensate themselves for the extra risk.

Personal loans are probably the most common form of credit that most people with bad credit will be seeking. This is usually because they wish to consolidate their existing debts. Personal loans are the most common way to consolidate debts. The personal loan will have fixed repayments over a set number of years and this will give you a definite date by which the debts will be clear. This is a big moral advantage to many bad debt customers who are tired of the extra hassle and stress of being in debt. Personal loans will also offer you far lower interest rates than most types of credit card. The main disadvantage of personal loans is that they will usually seek to be secured over your home. This puts your home directly at risk and means that you have be confident that you can keep up with repayments if you want to keep your home.

The other option is to go for a credit card. Despite having bad credit there are still credit card providers who will offer you a card. They will come with harsh terms and very high interest rates so you will probably want to be very careful that you do not allow a large balance to get racked up. You will also not get very much of a credit limit. Lenders will be wary of your credit history and will want to see some evidence of repayment before they forward you a large amount. Some of these credit cards will also require to be guaranteed by a family member who has a good rating.
About the Author
Joe Kenny writes for the Credit Card Guide, offering views on credit cards in the UK, visit them today for some great 0% balance transfer offers and start clearing credit card debt today.
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