Bad Credit Loans Explained

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You may be looking to raise finance for a particular reason or get credit for a purchase but you know that your chances are limited due to a chequered repayment history.  If so, you would not be alone.  Every year, thousands of people have their credit history damaged, and for a variety of reasons, many of which are unavoidable or inevitable.

However, if you are a homeowner, all is not lost.  Having a poor credit history does not totally exclude you from getting a loan.  If you have a seriously damaged credit record, it may require a little more effort, but finance should be available in the long run.

The first thing to do is contact a reputable finance broker that specialises in personal finance for homeowners.  There is little, if any, point in going to a mainstream or High Street Bank, as they tend to offer unsecured loans to people with perfect credit records.  A good finance broker will be able to offer you a secured loan which is more suited to your situation.  They will have a panel of lenders and, unless you are bankrupt, they should be able to cater for people with pretty much any type of credit history.  There is also little point in applying to more than one broker.  All the main brokers deal with pretty much all of the lenders in the market today.

When you apply to a finance broker, they will go through your current credit commitments and discuss any problems in the strictest confidence.  They will analyse your situation and then try to match you with the lender most likely to suit your situation.  In reality, they look for the best loan plan available to suit your credit record, with the best rate of interest, and this determines the lender.  Each lender has a method of determining an individual’s credit score, based on residence, employment and credit histories.  Each lender’s credit scoring system is different and some allow various levels of bad credit into the scoring system.

Once the finance broker has identified a potential loan plan, or possibly two, they will contact you to discuss the relative merits of each plan and identify if it is suitable and the right loan for your needs.  Assuming that you agree to go ahead, the broker will then issue all the relevant loan documentation for you to review.  This initial documentation is only information at this point, there is nothing to sign at this stage. There is a statutory ‘cooling off period’ of 14 days during which you have time to properly review all the terms and conditions of the loan and finally decide that you want to go ahead with the loan..  During this time, the broker is not allowed to contact you, but you may contact them. After 7 days have elapsed, the broker will then send you the documents that you do need to sign.  This is still within the 14 day cooling off period and cannot contact you, but if you are happy with everything, you are allowed to sign and return the documents at any time.

Once the documents have been received back at the broker, they will then set about getting all the relevant supporting documentation together to complete the loan application, i.e. proof of residence, proof of earnings, property valuation etc.  Once they have all that they need, they will submit the loan application to the lender.  As one final check, the lender may call you to verify that you are who you say you are and that you are happy to proceed.  Once the lender is happy that the loan application meets all their specific requirements, they will issue you with the cheque.

It is vitally important that you keep up with all the repayments on time.  Once you have had the loan for a couple of years, assuming that you have made all the repayments on time, your credit record may well have improved and you may find that you can refinance the loan onto a better rate of interest.  Contact the broker to discuss whether this is a possibility.

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November 3, 2010

Jason Krantz @ 4:27 pm #

Great info here – I was wondering why I was getting turned down for finance when trying to buy a TV on finance. I need to get my credit history repaired somehow.

November 4, 2010

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