|
Bad Credit Secured Loans
Defined as follows:
Bad credit secured loans are loans products that are specifically created for people with a bad or adverse credit history and secured against property.
|
|
Bad Credit Loans
SECURED ON
HOME
| |
|
Bad Credit Loans
SECURED ON
VEHICLE
| |
If you have a less than perfect credit history, then obtaining a loan from a mainstream lender can prove difficult especially in the current economic climate. A bad credit history is mostly a result of the borrower not being able to meet repayments on a debt including an overdraft, credit card bills, a personal loan or even a mortgage at some time in the past. Consequently they get a bad credit history meaning that they have been identified as someone to whom it is more risky to lend money to.
There are many lenders that offer specifically designed loans for people with adverse credit histories, many of which will consider such a loan without security (see unsecured loans) but most will consider the same loan with security. Anyone can apply for a bad credit loan but your age and employment status will be taken into account before any application can be processed. The minimum requirements are that you are over 18 and employed.
A secured loan is a loan where you will be required to use your property as security against the loan, so the lender is able to balance the risk of lending to you. The amount that can be borrowed differs from lender to lender and your individual circumstances. The amount that can be borrowed, the term available and the Annual Percentage Rate (APR) will depend on:
- the value of your property
- your ability to repay the loan
- your personal circumstances
You need to think very carefully about how you manage a secured loan. If you default on the loan you risk losing your home.
Secured loans allow you to borrow more and repay over a longer period than an unsecured loan, even up to 25 years. They can normally be used for almost any purpose and as the lender has the benefit of security they can be offered to people who may be excluded from other loans - CCJs, bad credit history etc. Borrowers who are self-employed, have recently changed jobs or have previous credit problems will also be considered for a secured loan. They are also useful for borrowing larger sums or where the applicant requires a longer repayment period. Interest rates / APR will always be higher for those with a bad credit history as a result of the increased risk to the lender but a bad credit secured loan should be significantly cheaper than an unsecured loan.
|
With a secured loan, the lender secures its loan against an asset you own. This means that, if you fail to pay back a secured loan, the lender can take possession of that asset in order to get its money back. Usually the asset is a home.
You are often able to borrow more money as a secured loan than you would with an unsecured loan; sometimes over a longer period too.
Secured loans may be offered on a variable rate of interest. This means the amount of interest you have to pay may vary over the course of the loan term, and your monthly payments could go up or down.
Where can I get a Bad Credit Secured Loan and is it right for me ?
If you want to borrow over £25,000 almost everyone may find it difficult to do so unless you offer to secure the loan against one of your assets. Similarly, to make the payments affordable, you may also want to spread your loan over a very long period of time.
A second reason is that you have a bad credit history and you may not be able to obtain a loan without the securinty of property against it - in this case you are looking for a bad credit secured loan.
So why go for a secured loan?
-
Easier to obtain. Unsecured loans are almost always cheaper for those with decent credit scores, but secured loans provide lenders with, well… security, so they're more willing to lend to poor credit scorers.
-
Big borrowing is possible. The maximum unsecured loan is £25,000 yet secured loans can be £75,000.
-
Borrowing over a longer period. Secured lenders prefer loans to last longer to help offset hefty set-up costs, usually from five to 20 years. Unsecured lending is usually one to seven years. Borrowing for longer does reduce the monthly repayments, but substantially increases the total interest repaid.
So, how much can you borrow? It depends how much equity you have in your house. Equity is the portion of the house that is already entirely yours i.e. that you don`t owe anything on in terms of mortgage / secured loans.
If you have a £50,000 mortgage on a house that's worth £150,000, you have £100,000 of equity, so you could secure a loan of up to £100,000 against that equity ..... in theory!
In practice, you should only borrow as much as you can afford to repay. You should also be aware that you're reducing your equity, which is potentially dangerous when house prices are falling - if you end up owing more on your home than it's actually worth, you'll be in negative equity i.e. you have a £50,000 mortgage, £30,000 secured loan and hour house value falls to £75,000 would mean that you owe £5,000 more than your house is actually worth.
A secured loan is like a personal loan - you can use it for any purpose - debt consolidation, home improvements, a new car, a holiday etc etc or a combination - it's up to you.
There are literally thousands of lenders offering bad credit secured loans so make sure that you shop around to get the best possible interest rate and terms for your situation - maybe also talk to an independant broker who can shop around on your behalf.
To reitterate: secured loans put your home at risk. Think very carefully before taking out a secured loan. |
|
|
Bad Credit Loans
SECURED ON
HOME
| |
|
Bad Credit Loans
SECURED ON
VEHICLE
| | |
Secured Loans
