Impaired Credit Loans

For those who have a poor credit rating (not necessarily bad credit), sometimes the only way they can obtain loans is through impaired credit loans (also called adverse credit loans). Those with poor credit ratings present an extra risk of non-payment, because the poor ratings are indicative of an inability to properly manage credit.

Many people in the UK get poor credit ratings, and one-fifth of mortgage applicants get turned down for this reason, according to industry estimates. This has formed a large enough market to attract lenders willing to take higher risks. By some estimates, there are at least 4,000 impaired credit loan facilities in the market so you should be able to obtain impaired credit loans.

You may need a good loan adviser for this undertaking. It is not easy to obtain in-depth information about impaired credit loans or adverse credit loans. Normally, most specialist lenders prefer to stand apart from the public, and you cannot go to a lender directly; you must course your application through a mortgage adviser, or perhaps an Independent Financial Adviser.

You will need plenty of good advice, so be sure about the adviser you will be getting it from. Although there are many reputable specialised lenders willing to give impaired credit loans, the market has also attracted a number of predatory people with no qualms about taking advantage of your poor credit situation. You must look for a mortgage adviser that gives professional service and is transparent about the costs and charges you will have to pay. It is possible to get information from the Financial Services Authority, at the FSA website, concerning mortgage advisers that are registered with the Authority.

The adviser is probably in the best position to make a realistic appraisal of the seriousness of your debt situation, and especially of how long it may take to repair your credit. You realise that impaired credit loans will carry higher interest than standard loans; the poorer your credit history, the higher the interest rate. A reasonable lender should not charge interest exceeding 4.5 percent above the Bank of England base rate. You will want to be bound to this loan only for as long as it necessary to restore your credit to normal. After that, you can switch to a normal good credit loan to save on interest payments.

Ask your mortgage adviser a lot of questions about the impaired credit loans. Some advisers have information from many lenders, whilst others offer only a limited selection. You should pin down details about the offered interest rate, the size of the deposit you have to put down, the term, and the rate to which the interest will revert after the initial term. Find a way to compare the various deals that the adviser will present, perhaps putting the data about key features in a kind of matrix, where the columns represent lenders and the rows list down the various features. This should make it easy to compare impaired credit loan features across the many lender options.

You should also be alert to the presence of missed payment penalties. Try to avoid having them in your impaired credit loan agreement. If you plan to switch to another lender when you regain good credit, be on the lookout for redemption penalties. It is preferable that the limitation that prevents you from paying the loan too early should not last beyond two years. Ensure that you get a fix on this item, as you may not be able to re-mortgage property when you switch.

Impaired credit loans help you to prove to the lending industry that you can manage your credit and stick to loan agreements. If you can stick to your repayment schedules, you should be able to borrow from mainstream lenders in the future.