A homeowner loan with bad credit is for homeowners sharing no existing mortgage or paid maximum mortgage to secure high equity/share in the home. The homeowner can use the equity built in the house for years as collateral for home-related improvements or renovations.
These are also known as second-charge mortgages. Individuals availing of the same with CCJ missed payments, and defaults need to provide concrete proof to repay the respective loan provider.
Adverse credit history can negatively impact the credit score, and you may lose the equity pledged to get the funds. You can choose a fixed or variable interest rate homeowner loan based on the potential and credit rating.
How does a homeowner loan on bad credit work?
Homeowner loans allow a person to borrow against equity. Home equity is the difference between the current value of the property and subtracting what you owe against it (mortgage payments).
The lower your mortgage payments are, the higher equity you share in the home. For example, if the value of your home is- £500000 and the mortgage balance is £35000, the equity you share is- £465,000. A borrower can only borrow a certain percentage of the equity he shares.
The percentage may vary from lender to lender. Lenders generally keep a cap on equity and allow only a specific portion to pledge as equity to provide the loan. It prevents one from entering into negative equity (It is when you owe more than the equity in the home).
As the lender share security in the form of home equity as the collateral, you may get the loan for bad credit. Individuals with bad credit history share high chances of securing a loan. You may build up your credit score by making regular payments on the loan.
Likewise, you may get the loan for a poor credit score, but it would increase the risk of losing the collateral or the equity staked if you miss the payments or default.
What if I face repayment issues for homeowners’ loans for very poor credit?
As mentioned above, defaulting on poor credit homeowners’ loans can make things difficult for you, and you may lose the property or the equity staked. Thus, it is ideal to take charge of your finances and contact us soon after you miss your three payments in a row. We may grant you extra time to clear the dues if you have momentary cash issues.
And if you want, we can even put your repayments on hold for the time being. These payments would incur the least interest rates. We understand that life could surprise you in any form. Thus, we provide homeowners loans for very poor credit to individuals needing urgent home updates. Make sure to borrow a lower amount than you need to diminish the risk.
Do not worry about further losing your credit, as we grant immense repayment flexibility. If you cannot make a lump sum, you can split the payments between months as per affordability and budget flexibility. It would help you manage other liabilities and secure your pricy possessions without worries.
Do homeowner loans for bad credit require a guarantor?
No. Homeowner loans are secured loans. Therefore, you do not require a guarantor to get the loan. The home equity or the property works as collateral on a loan. A guarantor is generally needed for an unsecured loan where the lender shares more risk while providing a large amount of loan with bad credit history.
You can apply and get homeowners loans for bad credit with no guarantor at the portal. Here you individually manage the payments instead of relying on a third person or a guarantor. When you are in charge of your expenses, you can strategize them accordingly. If you are currently low on your income, check out other ways to improve it.
A second income source would help you manage payments well and eliminate other debts lined up in the credit report. It results in a credit score jump. Lenders may consider a second payment source as a plus point in providing and approving your application for homeowner loans. You may earn better interest rates and borrow a flexible sum for home improvement.
Is there a possibility of 100% loan approval on bad credit?
While you may be scrolling 100% guaranteed loans for homeowners, you may improve your chances of approval. Here are some ways to increase your application potential::
1) Register on the Electoral roll
While it may seem unimportant, we prioritise individuals with proper identity and registration with electoral rolls. It grants application reliability. If we can verify your identity easily, you may get the loan. It is one of the factors that we count in case of bad credit profiles.
2) Clear pass credit dues
You must check your report if you constantly struggle to fetch a loan amount from lenders. Analyse it for the paid and unpaid debts. Eliminate the paid debts from your profile and pay off high-interest loans like payday, student loans, and mortgages to optimise your profile. We undertake recent financial and credit behavior. If we find it positive, consider the application.
3) Set up direct debits
With every loan you take, consider setting up a direct debit. It would help you maintain regular payments, so you do not miss on any. If you ensure payments on some of the most important loans in your profile, you will soon reach a disciplined profile that we may happily entertain.
We provide flexibility for manual or automatic debits. You can set any according to your comfort. If you wish to stop direct debit, you may do so too.
4) Make limited credit applications before applying for a homeowner loan
While you may share multiple responsibilities, from updating the drawing room in the latest trend with homeowner loans to catering emergency expenses before payday, you may resort to short-term loans to meet the requirement within the same day.
However, if you plan to apply for a homeowner loan for bad credit anytime soon, you must limit short-term loan applications. It is important to ensure minimal complications and missed payments in your credit report. Instead, spend time strategizing the existing debt repayments by either consolidating or refinancing.
Bottom line
Thus, whether you are applying with a bad or poor credit score for homeowner loans, it is important to analyze the purpose. You can use these loans for updates and renovation of the existing property. Contact us today to make the best bet and figure out possibilities to qualify without hurting your bottom line.
Jessica Rodz is the Senior Content Writer at Cashfacts. She has a long career in the field of content writing and editing. Jessica has the expertise in the UK lending marketplace where she has worked with 7 different lending organisations and acquired many responsibilities from preparing loan deals and writing blogs for their websites.
At Cashfacts, Jessica is managing a team of experienced loan experts and doing a major contribution in guiding the loan seekers via well-researched blogs. She has done graduation in Business (Finance) and now currently doing research papers on the UK financial sector.
