Getting a secured loan with bad credit
In July 2005 the Bank of England announced that Britain's personal debt was increasing by £1 million every four minutes. As the UK falls ever more deeply in love with debt; it's hardly surprising that more people are facing credit problems.
What is bad credit?
Anyone who's ever used credit (and let's face it, that's most of us) will have their credit history recorded with the country's leading Credit Reference Agencies; Experian and Equifax. Lender's use the information to asses an individual's risk when deciding whether or not to offer a loan.
A credit profile details a person's credit commitments and assigns each of them a monthly score. If a monthly repayment has been met; the score will be zero. If it hasn't; it will be marked one. If payment isn't met the following month; it's marked two. But it isn't until the third month of non-payment, when it's marked as three, that a default may be recorded. This effectively allows borrowers the occasional financial hiccup before it's entered on their credit history.
Your credit profile will also contain information on any County Court Judgements made against you and details of mortgage repayments.
Can I still get a loan?
If you are a homeowner, the simple answer is yes. Even if you have a bad credit record lenders are able to offset the risk of a loan against the equity in your property. And while you're unlikely to be offered the most favourable rates, there are still some competitive deals available.
Each lender has a different set of requirements; one may overlook credit defaults altogether while another ignores CCJs over a certain age. The art lies in finding the right loan for your circumstances, which is where brokers come in. Get the right broker and you should be able to find a loan at 12-13% APR typical variable . However, missed mortgage payments are regarded by lenders as more serious and intrest rates will be higher to cover the risk.
How much you can borrow also depends on your monthly income and the equity in your property. It's a moveable feast, but anyone with a bad credit history is unlikely to be offered more than 85% of their property's equity. However, if you have a clean credit history you can find lenders who will offer you 125% of your equity.
