Did you know that a bad credit secured loan can save you money?
At one time or another, most people have found themselves in some kind of financial difficulty. This can be through such things as arrears, a County Court Judgment (CCJ), bankruptcy, or because they have not paid back a loan or other debts on time.
This could be the result of a number of outside factors which may include a death in the family, divorce, job redundancy, or any other similar life changes which you have no control over.
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While these problems may not be of your own doing, be aware that any and all of these situations can cause your credit rating to be adversely affected.
Arrears
Arrears, consist of any unpaid taxes or any bills for utilities like water, gas or electric where the amount is not paid in full in a timely manner, or defaults where a loan or mortgage is not paid off either in part or in full, or it may consist of an unpaid credit card balance. This information is recorded by credit bureaus and made available to lenders who will give you a credit score based on this information.
County Court Judgment (CCJ)
In the case of a County Court Judgment, the debtor has the option to turn to the courts to make a legal claim to any unpaid debts owed.A judge can rule against you and make a legally binding decision that you have to pay in full or agree terms for payment to be met over a certain period of time.
If the County Court finds that you do owe money, a County Court Judgment (CCJ) will be made against you.You must pay off this amount in full within one month of the date of the judgment, or it will appear on your credit record for a period of six years.
Once you have the debt paid off, the CCJ will have been satisfied, and this will be duly noted on your credit record. You will be issued with a certificate from the lender stating that you have satisfied the debt. This should then be taken to the County Court where your record will be altered to indicate payment has been made. However in this case the CCJ will still show up on your credit record as a paid CCJ for the full six years, and unfortunately, there is no way to avoid this and it can still have an adverse impact on your credit score.
Credit Scores And Lenders
Each and every time you apply for a loan or any form of credit, like a charge card, personal loan, or mortgage, you are scored for credit. You are even credit scored before you can open a current or cheque account because they include overdrafts.
Lenders are interested to know whether or not you can afford the loan and whether you have repaid your debts promptly in the past. It shows how risky you are to the lender as a borrower.A score, or number, is given to the answers on your application form and information held on you by the credit reference agencies which they purchase in the form of a credit report.
Each lender chooses how many points to give each fact.A mathematical formula is used to find your total score, so the higher your credit score, the better. The problem is that each lender uses a different score, and you will get your personal loan, mortgage or credit card only if your credit rating or credit score is above a certain figure. If it is below, you will not, and you will not know what the pass mark is for the lender.
Bad Credit And Lender Competition
Competition in the loan market has become quiet fierce lately, and bad credit is becoming less and less of a factor in acquiring a loan. In many cases lenders are starting to specialize in providing loans to people in these higher-risk categories.This is because they can charge a higher interest rate on the loan, figured for a longer period of time, to maximize their profits in the face of a riskier proposition for them.
One way for lenders to minimize the risk is to secure the loan on your home as collateral for the loan.You can use the proceeds from this loan anyway you choose, you can pay off any existing debts and improve your credit rating.Be aware, though, that should you default on this loan, you run the very real risk of losing your home.
Although the interest rates may be slightly higher for a bad credit loan the competition in this market is putting pressure on the Lenders to lower these rates. A bad credit loan can also improve your credit score providing you make timely re-payments of your loan you can improve your credit score. An improved credit score will see you get a better rate the next time you may need finance.
So essentially in a round about way a bad credit loan can save you money in the long-term.
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