When you decide to raise additional funds with bad credit you are putting up more than a financial liability. It could be stressful as well as a challenge to search deals with bad credit loans. For, the main street lenders would not entertain loan applications with a low score. You would require to “search” for private deals online or off, which indeed could be a pricey affair with bad credit history.
This is why a majority of borrowers rely on small loans online to instantly meet the cash gaps. But when it comes to raising a high ticket loan, managing the loan instalments can be a major hassle for people with poor credit health.
Herein, home equity comes out as a guaranteed resource to raise long-term loans at affordable price despite bad credit. You do not need any loan guarantor to get approved for homeowner loans.
Let’s find out below what homeowner loans are and why they are so popular among people who need smart funding with a low score.
What are homeowner loans?
Homeowner loans are second charge loans against your home. When you apply for an additional loan against the part of home equity you own despite the current mortgage you are basically applying for a homeowner loan. These are secured loans and thus offer you a better rate of interest despite low credit score or low credit history.
How does a homeowner loan work?
Homeowner loans are all-purpose loans which work as secured instalment loans against the home equity you own. Based on the ownership of home equity your eligibility and rate of interest for a loan is calculated. You are supposed to pay periodic instalments, strictly as mentioned in the loan agreement. You do not need any guarantor to avail homeowner loans.
Generally, people use homeowner loans for high ticket loans up to 30 years. However, with bad credit, it is advisable to not keep the duration of loan very high.
How can I get a homeowners loan with bad credit?
With bad credit, you can search for more flexible and affordable deals online. You can contact an FCA authorised loan broker and make a query online. This would not initiate any hard check. The regulated brokers have links with experienced lenders who pre-approve loans for people with certain credit rating limitations. Based on your profile, they will pick and choose the best deal for you. There is no obligation to make the decision. You can compare and select the most affordable loan.
Do secured homeowner loans affect credit rating?
Your bad credit score is a result of irregular loan repayments, high debt to income ratio and/or high credit utilisation ratio. A low score indicates risky profile that might fail to afford more credit. When you raise an additional loan on your home with a poor score, you certainly bring a red flag indicating high-risk loan. Thus it is not a homeowner loan that hurts your credit rating but your overall profile. In fact, by repaying your homeowner loan on time, you can build good history and boost your rating.
If you have more questions on home equity loans, feel free to use free broking advice. The FCA has authorised certain loan brokers to assist borrowers at each point. Many borrowers do not charge any upfront fees from the brokers and thus you could use their service free of cost online.