An adverse credit loan is a loan designed for those who have a poor credit history. You could be considered as having a poor credit history if you have CCJ's against you, have been declared bankrupt, are or have been in arrears on mortgage payments or loans, or have defaulted on repayments. Adverse loans should never be entered in to lightly as they come with high interest rates and failure to keep up repayments could put your home in danger of repossession in some circumstances.
This type of loan could help turn a bad credit history around, provided that you keep up with your payments faultlessly. The recent good credit history will help counteract the older poor credit history as time goes on. Lenders can offer between £5,000 up to £300,000 and will expect monthly instalments to repay the loan.
A history of poor credit combined with a higher risk of falling behind with your payments will mean depending on your individual circumstances, those looking for an adverse loan can expect to be offered an interest rate of around 15%. The borrowing rates are high, but until there has been an improvement in your credit history, there is not much chance you will be considered for lower rate. There are quite a number lenders out there that provide for the sub-prime market, so do shop around before taking out your loan.
Lenders often require evidence that you have every intention of repaying your debt to them. This is because borrowers with a poor credit history are considered as higher risk borrowers. The lender will often ask for this surety by using your home as security against your loan. Securing your home or your property against your loan can help reduce the cost of the loan.
The harder borrowing terms, combined with a higher interest rate, means that you will need to be extra cautious when borrowing for a loan - defaulting on payments could result in you losing your home, so do not borrow any more than you can realistically afford or need. Read the terms and conditions of the loan extremely carefully before you agree to the loan - your home is at risk, so it pays to be extra caution when applying for a bad credit loan. If you do not own your home, there are also loans available for tenants with bad credit. Borrowing no more than you actually require will also have an impact on the cost of your loan, and the interest offered.
It pays to be extremely caution of companies that guarantee you will be accepted for an adverse loan - be sure to check the small print, have any verbal agreements confirmed in writing and go to a reputable company. If the offer for your loan sounds too good to be true, then it probably is.
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