Is A Bad Credit Remortgage The Right Refinancing Option For You

No-one is perfect. I am sure we can all remember a time where we have got into financial trouble, be that big or small. Therefore, we can sympathise with those of us who have been continually rejected by lenders based solely upon our poor credit. There are various reasons why an individual can have bad credit, from unexpected illness to county court judgements (CCJs) to bankruptcy or repossession. Bad credit can also be resultant of quick loans, for example payday loans and credit cards as they create illusionary spending power, which prompts extravagant spending. This can often result in the borrower becoming trapped in a vicious cycle of loan dependency.

Most mainstream mortgage lenders will not lend to individuals with a bad credit record. Although, there are various specialist lenders in the market who specialise in loans for people with bad credit; such firms usually operate exclusively through mortgage advisors and do not have high street branches but are usually owned by mainstream lenders that do. The term bad credit remortgage often comes under various guises including problem remortgages, sub-prime remortgages and non-conforming remortgages and are becoming common worldwide to raise money to pay off existing debts.

Offers like poor credit history remortgages extend their benefit to help especially those who are struggling with a bad credit history and resultantly are forced to stick to an expensive mortgage schedule. Poor credit history remortgages ensure stability by securing lower interest rates and offering debt consolidation to pay off existing debts. They are designed specifically for individuals who have bad credit and therefore have easy and realistic terms which help the borrower manage their loans, thus paving way towards a better credit rating.

The advantages of obtaining a bad credit remortgage include that they do not require you to more from your mortgaged property and they allow you to use the borrowed capital to pay off your existing debts. The lender will arrange an interest rate that is also agreeable to the borrower and you will only have one monthly payment to meet (although, the agreement will be made to intentionally minimize the risk to the lender).

Additionally, if you pay off your mortgage without defaulting and you keep to the restrictions, your credit history could be cleared within 3 years of your final payment. All the above ensures that the best remortgage terms can be enjoyed despite a bad credit record. The general idea is that you release some of the equity in your home and use this to repay your creditors.

As with most things in life, these advantages are also teamed with various disadvantages of obtaining a bad credit remortgage. For example, bad credit remortgages change an unsecured debt into a secured debt as your property is secured against the loan. Therefore, failure to meet payments and stick to the agreement could lose you your home. Also, you must be highly clued-up and wary when shopping around for the best bad credit remortgage deal as certain lenders intentionally set up great deals, but end up hiding various aspects of the contract. Most UK financial advisors will advise you to stay away from smaller; newly established companies that perhaps are not as strong as those owned by mainstream lenders.

In order to determine whether a bad credit remortgage is right for you, there are a few tips which could be useful to bear in mind. You should always assess your lifestyle to ensure that you can factor in some internal discipline to cut expenses that are considered luxuries. Also, you must be honest with yourself and establish whether your current mortgage is really something that needs replacing; if you already have a decent deal, it would be unwise to consider a remortgage. You must assess your monthly income; having a well paid and stable income will ensure that you can meet your payments with little trouble.

In addition, do your homework; talk with both mortgage brokers and banks to see who can truly provide the best loan. Second, learn the credit game, be proactive and check your credit record before pursuing a home remortgage loan. The Data Protection Act requires that credit reference agencies provide you with a Statutory Credit Report which you can obtain for around 2 pounds. The credit reference agencies in the UK; Experion, Equifax and Call Credit, compile information about your credit history and provide a report about your bill paying habits to creditors who subscribe to their service.

Bad credit remortgages are a great way to save temporary, short term money, but they are specifically designed as a financial last resort. Consequently, they should be treated as such and if you can find other affordable ways to build your credit rating then it would be advised to try those first. The more proactive you are in dealing with your bad credit now, the faster that county court judgement, late payment or individual voluntary arrangement (IVA) will be behind you.

It may sound like a huge list of To-Dos that may be quite time consuming, but once you have done your homework and collected all your financial reports, obtaining the remortgage itself should take no longer than a couple of weeks, and when you have that little bit more money in the pocket, the homework will undoubtedly be worth it.