My six-year-old said something that made me think a lot when my wife asked me how things were going with the home loan we were planning to get. The subject was the fact that a lot of loan providers kept turning me down because my credit file showed a bad credit history. On this, my son said, "Why do loan providers refuse loans on the ground when needs keep coming up even if you have bad credit?"
Even though this is a childish statement that doesn't make much or any sense, it requires you to think. It is true that banks won't give you money just because you need it. Banks and other financial institutions have a policy that says they must first make sure that a loan application doesn't pose too much risk.
But can loan companies keep turning down loans from a group that is growing by leaps and bounds? Some loan companies in the UK have stuck to their old ways of lending, but most have changed to fit the new situation. A new loan called a "adverse credit homeowner loan" is made for people who have had credit problems in the past.
Credit trouble homeowner loan is the loan given to people with bad credit who want to buy a home. If you've never had bad credit before, let me remind you that it can be caused by anything from a simple default to bankruptcy. Every time this happens, a note is made in the borrower's credit file. A borrower whose credit file has a bad mark will be called a "problem case." When these people try to get loans, they run into problems.
Bad credit homeowner loans, on the other hand, don't cause much trouble (provided proper search criteria are utilized). This is because the home of the borrower is used as collateral for the loan. Homeowner loans for people with bad credit use the equity that is already in the home. The good thing about this method is that the borrower can use the home's equity. This loan is also called a home-equity loan for people with bad credit because it is based on equity.
Will this cause the borrower to have to move? This isn't important. When you know this, the myths about moving fall flat. The only thing the loan providers need are the property papers. So, there is only a formal change of ownership. When the term of the adverse credit home owner loan is over and the borrower has paid off all of his loan accounts, the borrower can get his property papers back. But if the borrower doesn't pay back the loan, the lender can take the home back. Loan providers are willing to overlook one missed payment. But if people keep not paying back their loans, loan providers will start repossession proceedings.
There are some differences between regular home loans and loans for people with bad credit. People with good credit can get regular homeowner loans. A good credit history shows that a borrower will always pay back what they owe. Using the same reasoning, borrowers with bad credit histories are more likely to not pay back their loans. Because of this higher chance of risk, there are differences.
First, the amount you can get with a bad credit homeowner loan is lower than with other types. Also, the interest will be higher than usual. But negotiating and bargaining do work for homeowner loans for people with bad credit. There are loan providers who are willing to offer good terms on homeowner loans for people with bad credit.
You'll wonder why you couldn't get a bad credit homeowner loan. The reason was that the search criteria I was using to find loans for people with bad credit were wrong. Because I was busy at work, I only talked to local lenders. They were closer to my home and office, so it was easy for me to go see the lender. On the advice of my friends who had previously taken out home loans, I chose to work with local lenders. I was told that as a borrower, I would have to go to the loan provider often to fill out paperwork. But the local lenders were the kind who would treat people with bad credit like they didn't belong.
A good bank showed me how to look for loans and apply for loans online. The bank employee told me that I can contact them through their website instead of going to their office. After doing more research, I found that an online search can help me find a lot of loan companies that offer bad credit homeowner loans. There are a lot of other things that can be done online. Some of them are rate comparison, loan application, etc. Since then, I've always applied and looked for jobs online, which I've found to be much more convenient.
