Bad Credit History Loan | What You Should Know
Need a bad credit history loan?
A bad credit history loan is designed for those people who have damaged credit records. If you have had financial difficulties in the past a bad credit history loan might be your best option.
Many people have money problems at some point in their life through no fault of their own. Divorce, redundancy or bereavement can all lead to people becoming indebted and damaging their credit records. Because many loan providers base their lending decision on your credit history, you may see your loan application rejected if you do not specifically apply for a bad credit history loan. But what exactly is a bad credit history loan and how do they work?
A bad credit history loan works just like a normal loan, except it is usually secured on your property and therefore only available to homeowners. This is because the lending decision is not solely based on the ability to repay with a bad credit history loan.
While the lender will clearly take your ability to repay the debt into account it also has the added security of taking out a second charge on your property. If you default on your repayments your house can be repossessed and sold to repay the lender.
Because the secured loan lender will have a second charge over the property it will only be repaid after your initial mortgage lender has first been repaid all of its debt, as it holds the first charge over the property. But with the large rises in house prices over the last 10 years, many people have enough equity in their property to cover this eventuality and repay both debts on the sale of their home.
What are the benefits of a bad credit history loan?
The benefits of a bad credit history loan is that available for those with damaged credit records, as long as they have equity in their property. They also have lower interest rates than many loans on the high street and can be arranged quickly and easily. Usually you can make one phonecall and have the money in your account within a week. You can choose your repayment term and can usually choose a longer term than with an unsecured loan, which can help reduce your monthly repayments.
Things to consider if you are taking out a bad credit history loan are that because it is secured on your property your home could be repossessed if you do not keep up with repayments. And while the term available to repay may be longer than the term on a unsecured personal loan this can mean that overall costs of repaying the debt can be higher than a shorter-term loan with a higher rate.
If you want to know if a bad credit history loan would suit your needs and circumstances it could be worth visiting a specialist adviser who can find the most suitable product for your needs.
