While giving a loan to someone, the institution tries to make sure that the money it lends comes back to it. For this, they make sure with various checks and documentary proofs that the loan applicant has a good credit history. But for people with a bad credit history, but requiring money to either to clear off the present debts or to meet other expenses, getting loans is not very easy. For such people, high risk personal loans are available, but at a cost of higher interest rates as compared to other loan schemes.

A high risk loan is generally not backed by collateral, but only signature of the applicant. The applicant does not need to put anything on stake. When borrowing money, the lender may require nothing more than applicant`s promise to repay the debt. High risk personal loans usually involve less documentation, is usually quicker and does not require a formal closing. The borrower is also not needed to have a co-signer to give personal guaranty for repayment of the taken loan.

High risk personal loans indeed have some advantages to offer to the person with bad credit. The loan seeker can use the high risk personal loan to better their credit by making their payments on time and paying the loan in full. If they are able to handle their high risk personal loan nicely, they can ensure better loan rates in the future. This will strengthen the loan institution`s belief on the loan applicant and he may get a good welcome the next time he applies for some loan.

High risk personal loans are much easier to apply for because normally, the procedure is quick and quite informal. Moreover, the sanctioning time for these loans is quite short and debtor can get the funds directly deposited into his account of particular bank. If one wants to find out whether he qualifies for a high risk personal loan, one can find information from lenders at credit unions, banks and other financial institutions. There are even lenders online that will be willing to lend one high risk personal loans.

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What are High Risk Personal Loans.
I will call them HRPL for short, but these are loans which you can get for personal use, to use for whatever you need, the bank or loan company will not usually ask you what the loan is for, and even if they do, the loan is not in jeapordy if you are using it for home improvements or a holiday rather than to buy a home for example.
A HRPL comes from a loan company or the bank, and usually is secured against your home, or another asset you may have, this could be your car if you have a high value car.

What does "secured" mean?
A secured loan, is when your home or other assets are put up "against" the loan, in laymens terms, this means if you don't pay the loan back, your home or assets can be taken to pay off what you owe. This is assurance for the company or the bank, that even if you do not pay the loan, they will not lose out!

Who can have a HRPL?
Anybody can basically get a HRPL, so long as you have assets which the loan can be secured against and have generally a good credit score- this means you have never been bankrupt or have any serious defaults or CCJ`s (county court judgement) when you have failed to pay off previous loans or fincances.
These loans are usually for home owners, but tenants can sometimes get them with certain companies, so long as they have other assets- they may ask for a guarentor (someone who IS a home owner) to co-sign the loan, and if you do not pay the loan off, it will be THEIR home which is taken if they cannot pay your loan off for you.

So are these loans a good idea then?
That all depends on your personal situation. For someone like me, who is a tenant and who has no assets, a HRPL is not a good idea as we may not have the money to keep up with the payments in the future. But if you are in a financial situation where you are sure you will be able to keep up with the repayments, and you are sure you won't miss any payments, then these loans can be a good idea if you really need the money;

The loans are usually above £15,000 (or 20,000$),and go up to around £150,000 (or 200,000$), so they can be used for whatever you need it for, whether it is to consolidate other loans which you may have and find one lump sum would be able to pay it all off and lower your monthly payments (many people don't recommend this, but so long as you are sure you can keep up the payments then I don't see the problem with them). They can also be used to put a deposit on a house, or even to buy a house outright- it may be cheaper than a mortgage! Or you may just want to go on a once in a lifetime trip, do some home improvements, buy a new car, or even just treat yourself, but for a loan of this calibre, you should really only consider the loan if you really do need it, and not just because you'd like it.

What kind of interest would you pay?
These loans tend to have lower interest payments than smaller term loans, as these loans are taken out over between 10 and 25 years usually, your payments tend to be relatively low, with an interest rate of between 5%APR and 25%APR, you would need to shop around to find the lowest interest rate! You may find you are lending £15,000 and paying back almost double that over 25 years, so ensure you are not been ripped off! If you have bad credit, you may have to pay a higher interest rate, so maybe consider improving your credit score before applying for one of these loans!

Other Options available instead of a HRPL?
If you need a large lump sum, but do not want to get a loan which is secured against your house or other assets there may be a few options available to you. There are some companies in the UK which will lend up to £15,000 unsecured against any asset, though these loans do tend to have higher interest rates, and so your payments may be more.

If you are getting a HRPL to pay off other debts, another option you may think about is a Debt Management Plan, or an IVA where your debts are written off or sorted out into much lower payments. This puts your credit score on the line, but it means you are paying much less towards the debts, and if you are struggling to pay, legal action is put on hold, as is interest.

If you don't "need" the money for something important, then you could try saving the money up over a few years!

If you are getting the loan for a business, you may be better off with a business loan than a HRPL.

All in all
I think it all depends on the individual as to whether High risk personal loans are good, but I hope this helps anybody considering a high risk personal loan to decide once and for all what the best idea is for them, they are brilliant if you need the money now for the long term and can afford to keep up the payments for the full term of between 10 and 25 years and do not need to worry about your assets been seized, but they require a lot of thought before jumping into them!