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Bad Credit Loan Mortgages – 3 Vital Steps to Apply!

Bad credit loan mortgages, often referred to as bad credit mortgages are for people experiencing a problem in getting a loan or a mortgage to purchase a home due to a poor credit history. They are also known as sub-prime mortgages, adverse credit mortgages, or non-status mortgages and are intended for people who are not able to qualify for traditional mortgages.

Bad credit mortgages are for anyone having a problem re-mortgaging or getting a mortgage to buy a property due to bad credit issues such as credit arrears, perhaps even a previous foreclosure.

Bad credit mortgages are not offered by all lending institutions because of their higher risk so a borrower has to find a specialist lender that is willing to look at each individual case. So how would you go about finding one of these specialist loans?

Step 1 – Research and Self Assessment

The first step is to do some research. It’s a very big market and the best deal is not the first one that comes along!

The borrower must try to assess how the bad debt situation arose. Was it due to ill-health and subsequent unemployment? Has that life episode been corrected and is there evidence to substantiate that? Was it as a result of a divorce (it’s amazing how many people slide into adverse credit just before or after a divorce!) and again has that been rectified or are steps being taken to reverse the situation.

When the borrower is ‘armed’ with valid reasons for the poor credit score then the next step can begin.

Step 2 – What is your current financial situation?

This is actually a very relevant question. If you already know what the personal circumstances are that have contributed to the acquisition of a poor credit history – you should know if your present financial circumstances are now stable or not. For example, if your adverse credit score arose through a long period of unemployment and you now have a job so that you can demonstrate your ability to repay a loan to a lender and you know that you could imminently lose the new job – then you should think again about your course of action or get a new job before you apply.

If you feel or know that you’re in position to repair your credit and this is of extreme importance, and you are now in a ‘stable’ financial situation then you should consider the next step.

Step 3 – The Application process!

The application process differs according to the method of application you use. This stands to reason. If you apply online then it’s often a case of filling in a form that ‘pre-qualifies’ your application. This means that the lender initially uses the information you have supplied to indicate whether your application will be ‘potentially’ successful. However, because of the recent credit squeeze this application process now usually requires an ‘interview’ usually with an employee or agent of the lender.

However applicants are usually more successful in obtaining a mortgage when using the specialist services of a broker or advisor. There is a very simple reason for this. A broker will generally not waste his or her time in dealing with your application if it’s not going to be successful. You may have to pay a bit more – but then, depending on your circumstances, you are more likely to get that loan. It is worth enquiring, if you do engage a broker/advisor whether or not their fee is included in the loan package as some are.

It’s important to consider if you are looking for bad credit loan mortgages that you, research, reflect and act. In that order. You must also remember that the cost of an adverse credit mortgage is going to be more than a mortgage based on a good credit score. So if you are looking to repair or improve your credit score and can afford for 2 to 3 years to take out an adverse credit mortgage then this can be a good way to repair your credit score. If not please be careful as most foreclosures and repossessions occur with people with a bad credit history!

The Benefits to a Low Interest Bad Credit Loan

A low interest bad credit loan offers the borrower numerous benefits. By having a lower interest rate the borrower can save hundreds and up to thousands of dollars over the term of the loan. Low interest loans are secured by collateral such as a home, a vehicle or any other type of valuable property.

The more valuable the property is the more money the borrower can save in interest payments towards the loan. To receive the best deal on a low interest loan the borrower needs to have a high valued collateral to secure the loan with. With better collateral backing the loan, the lower your monthly payments will be.

People who have a bad credit score do not need to feel like they cannot get approved for a loan any longer. They too can get a low interest loan but it will be slightly higher than those who have perfect credit. Quite often it is the collateral being offered that will make the final determination of your annual percentage rate.

Reasons For Wanting A Low Interest Loan

There are many reasons for wanting or needing a low interest bad credit loan. A lot of time the borrower will use the low interest loan for home renovations that will raise the value in their home such as bathroom or kitchen remodeling, a new roof, or finishing their basement. Other reasons include debt consolidation for a lower monthly payments and sometimes emergency medical bills. You can use a bad credit loan for a new car, a wedding, college, vacation or any other personal desires. No matter what the reason is for getting a low interest loan, it is bound to save money for the borrowers.

Where To Look To Apply

There are numerous places to look for this type of loan. A lot of the time people will decide to go the more traditional route, which is through a well known personal lender, whether it is a bank or financial institution. This can offer some peace of mind for many, although having to deal with these kinds of lenders can be quite the hassle for busy people. Going with the in person lender, you require a physical appearance which can be difficult to someone with long working hours, or family commitments. This also requires substantial amounts of paperwork, and a longer wait time for the approval.

The easiest way to apply for this type of loan is through the Internet. Online lenders offer low interest loans with an easier system of shopping around. Borrowers are able to search their website for free online quotes, advise and even loan tools to help find the best loan available to them. You can apply to multiple lenders at one time.

Online lenders provide the tools that the borrowers need and information to help get a low interest loan with affordable monthly payments that they deserve. Bad credit loans not only help with getting the money for things they need but these loans also help the borrower get their credit score up. This is a major benefit for those who have less than perfect credit.

More Options With a Bad Credit Loan

There are many reasons someone would consider a loan, yet if they have bad credit they will have a hard time obtaining one from a bank. A bad credit loan may in fact be exactly what you are looking for. Not only will you be able to avoid continual rejection from larger lending firms or banks, but also you will be able to correct the inconsistencies that your credit score may carry. This is because you will be making the payments for the loan to the lender; this will only strengthen your credit score. What this will do in the end is make it easier to obtain another loan at a later date without much issue.

What This Loan Can Do For You

The possibilities are endless when it comes to the uses for a bad credit loan. Many people use such loans to pay off debt as this will in fact make your credit score much stronger and give you some financial breathing room. If you happen to run into a medical emergency, this is a great way to have all of your bases covered. Perhaps you are looking at a new car, or plan some much needed repairs on the car that you already own. This will give you the freedom to accomplish this, and provided you make the timely payments to the lender you will see much improvement on your credit rating in the end.

This type of loan can also be used for such things as school funds, home repairs and renovations, vacations, or even to fund their wedding. The list can go on and on, but the fact remains that this is a very convenient loan to get.

Default On A Bad credit Loan

Once you have worked out the fine details of the bad credit loan with the lender, it is up to you to ensure that you follow the terms and conditions adhered to it. This means that all payments must be met when the payment is due, set out by the lender. The lender does have room for some flexibility and understands that issues can arise out of nowhere, but they do appreciate and expect you to inform them of such issues. If you fail to do so, you will be placing yourself in a position where the lender may call default on the loan. This will be a big problem, and one that may be very difficult to get out of.

If the lender required you to leave collateral for the loan prior to being approved, you will loose this collateral to the lender. The collateral will be placed on public auction, in an attempt to reclaim the funds lost from the defaulted loan. The bad credit loan is not unlike any other loan; terms and conditions must be met as specified by the lender. In not doing so, you are not only making your financial matters worse, you will be further damaging your credit rating even further.

There is a great possibility that the lender may seek compensation through a lawsuit that will be filed, in order to reclaim lost money. Any hopes of future loans, after a default will be slim to none so it would be best to pay attention to what you are doing.