Bad credit equity home loan
Mortgage companies are always looking for customers ready to take loan for homes and advertise attractive incentives for them to take a loan. But the same company shirks in giving any loan if they find out that the bad credit equity home loan rating of the borrower is poor. They either refuse the loan or try to raise the price. Figures show that more and more people in Britain apply for bad credit equity home loan. Most of these are London based. Other cities like Manchester, Birmingham also have a high number of bad credit equity home loan applicants.
What is a bad credit
In bank terminology following things can give bad credit
* Late payments on credit card, loans , store card etc.
* Defaulting on past loan
* Bankruptcy
* Mortgage arrears
* Bad conduct of bank account
* Repossessions
* Defaults or CCJs(County court judgment )
As soon as you fail to make a payment this is flagged on to your credit report and mentioned. Hence one has to be careful about paying the installments.
Credit reference agency files.
In UK there are three companies namely
Equifax
Experian
Callcredit
Which keep a complete record of every UK individual.These files contain electoral rolls ,County Court Judgments (CCJs) and bankruptcies. Plus they also process financial data regarding payments and transactions. Every individual can check reference by writing to them with a check of 2 Pounds. The detailed address is as follows :
1.Experian Consumer Help Service, PO Box 8000, Nottingham N61 5GX
2.Equifax ltd, PO Box 3001 Glasgow G81 2DT
People who have these poor financial records have faced difficult situations in life. Periods of unemployment , sickness , personal tragedies etc. certainly take a toll on families. They face financial drains as well as emotional troubles. At these times the payment of bills become impossible and hence they get poor financial scores even if they don't want to.
Lenders in general realize this and specialists are there who either ignore the credit history or lend with a slightly increased rate. Housing prices are increasing in UK and the rate of interest is falling. Prices have almost doubled in last 20 years. All this has made the lending very lucrative and there are chances that one can get a good bargain even with a poor credit record; from certain companies.
After finding the true position regarding the level of your credit record ,you have to decide what type of loan you have to take. There are two types
1.Secured loan
2. Unsecured loan
A secured loan is one in which you give security of your home , car , share stocks or business security etc. In these the interests are relatively low.
In unsecured loans you donot give any security. Such loans are very difficult to get and even if they give it is at a higher rate of interest. But now a days one can find some companies on net which give this type of loan at slightly lower rates.
Bad Credit Home Loan
Due to the internet services these days it is comparatively easier to find a company which can give the loan of your liking. One can search from the comfort of ones home and find a long list of companies giving these bad credit equity home loan.They offer it on their sites and cannot goback when confronted in person. These companies take care of all the shortcomings in your credit history and offer the loans at good bargain. This is because they are eager to do business in this rising market. Hence a careful homework can greatly help you in getting a good loan at a reasonable price. It is natural one cannot expect these loans from the banks etc. who simply refuse to take such a risk.
How can a sub-prime mortgage help
A sub-prime lender is he who lends to borrowers who donot have a good credit history and hence do not qualify for loans from mainstream lenders. Some are independent bodies but mostly are branches of the mainstream lenders. It is better to approach the lenders of the joint nature as in general they will try to accommodate you in the prime membership but if they cant, only then, they will offer you loans from the sub-prime branches.
Sub-prime Lending Terms
The entire structure of rates and fees are higher for these lenders to cover up the risk and costs. They tend to process more applications and thus incur greater expanses to get to the deal.
In general the danger is high that the borrower will default.Not only this people in general try to prepay the loans and join the prime-lenders once their credit worthiness is O.K. But the taxes and insurance charges are not required in these cases.
The 2/28 ARM
A very common mortgage in the sub-prime market is the 2 / 28 ARM.In this the rate is fixed for 2 years , after that the interest is reset to the value prevailing at that time plus certain margin. This margin is quite high and there are chances that the rate rises quite much after 2 Years. As an example if the rate is 8 % in start, it will jump to 10 % after 2 Years even if there is no raise in the index.
In general people try to rebuild their credit in the 2 year period and then try to finish this loan by taking a refinance bad credit equity home loan from prime lenders. But here they have to pay a heavy penalty for pre-payment. Borrowers should guard this possibility right in the start of taking the loan.
Some guidelines
Sub-prime lenders aggressively try to sell their loans to people who are already paying back some loan on homes. They try to give them refinance loans. But if they are in a locality where in general people having low credit rates live , they try to give them loan at Sub-prime rates even if they qualify for the prime rates. So as to avoid this happening to you it is better to take some precautions.
Some of them are:
* Never allow solicitation without confirming other options with other providers.
* Check your position reg. Prime loans with standard companies.
* In case these companies or for that matter some other companies on net do not consider you for prime lending then the best thing is to hire a mortgage consultant by paying his fee. These people can understand all the underhand postulates of sub-prime companies and can safeguard your interest. One should never forget agents get more commission if they book you for higher rate loans.
But all said done at the end of the day for a poor credit borrower the sub-prime loans are best. Majority of mortgage companies require two consecutive years of employment but these companies give loan even after one year of employment
It is difficult to find firms which give 100% financing. This means you have to give some amount yourself to get the loan. This is difficult for the type of borrowers we discuss. But on the net one can find some companies which offer upto 103% mortgage loan.This takes care of the processing fees etc. also. However to qualify for such a loan at-least a credit score of 600 is needed.
For loan repayment better your credit report
Home loans normally involve a huge sum.Hence everything attached to it is quite expansive. In general the strategy of such borrowers is to somehow increase the credit rating and
qualify for the prime rate loans. This can be got if all the repayments of this loan are given in time for the first few years. Once the credit rating improves a refinance loan is taken against the same property at a lesser rate and the old loan from sub-prime company is paid off. This not only reduces the risks involved but a lot of saving in money is also achieved as the new loan is at a lower rate of interest.
A track should be kept of your credit rating as the Govt. law allows every one to check his rating at-least once a year. Apart from this some people hire brokers to advise them on this aspect too. They keep you updated about your credit rating off and on.
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