For a great many of UK residents, personal financial debt is an ongoing and often escalating problem, with more than 300 people declaring bankruptcy or insolvency every day on average. Meanwhile, the Citizens Advice Bureau says that it deals with around 6,600 debt problems every day.
The majority of those with debt problems are likely to have a damaged credit rating, which can make it very hard to obtain further lines of credit. They will have a very limited number of options at their disposal.
There is one popular option for such individuals though. This is an “adverse” or “bad credit” secured loan.
Lenders offering such secured loans tend not to place as much weight on a person’s credit rating, as long as they have some form of collateral to cover the cost if they end up defaulting on the loan.
The two main downsides to this option are higher-than-usual interest rates and the risk of losing one’s home.
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High interest costs can be reduced by extending the length of the loan from 25 years to an even longer period – although this will increase the total amount of interest paid.
Sadly, there is no way to counteract the risk of losing one’s home, as this is the only thing giving the applicant access to the loan in the first place.
In some cases missing repayments for just one or two months can prompt the lender to take action, and look towards repossessing your home.
Not all lenders are this strict though, with flexibility ranging greatly from lender to lender. It is therefore important that such situations are discussed with any potential lender before signing the contract.
This way, if down the line you run into difficulties making repayments then the lender may be willing to simply extend the loan term, or even give you a “payment holiday”.
As with any debt secured against ones home, it is vital to weigh up the pros and cons beforehand, ensuring that monthly repayments are achievable.
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Debt Consolidation & Bad Credit