The main stream lenders in general do not lend to people with a poor credit history, and each time you apply to one for a loan and you get refused it adversely affects you credit rating. You are much better off going to companies who specialise in poor credit loans, yes you will find that the interest rate is higher and there are other conditions attached to the loan.
Typically poor credit loans come in two forms secured and unsecured, which is the norm for the finance industry.
The secured form of loan are available to borrowers who have some form of valuable possession (normally the house they live in), that can be used as security for the loan. The lender has the right to take possession of the property if the borrower cannot repay the loan amount within the agreed time frame. Because the lender has some form of security that they will get their money back there is less risk to the lender and so the interest rates charged are lower and the amount that can be borrow is greater. Typically the loans range from 5,000 to 75,000 and the length of the loan period ranges from 5 years to 25 years.
Unsecured poor credit loans typically range from 1000 to 25,000 with the borrower repaying the loan back in 1 to 10 years. However as there is no requirement for security and therefore more risk to the lender, the interests rates can be quite steep. And the borrower must meet the following criteria
a)The borrower must be a citizen of the country.
b)They must be over 18 or 21 depending on country.
c)They must have a minimum monthly income.
d)It is important that they must be employed in a legal organization.
e)They must have a valid and active bank account.
What to do to increase your chances when applying for poor credit loans
1. Borrow as little money as possible in order to keep your loan-to-value ratio (LTV) to a minimum:
This applies to loans secured loans on your home
No matter what your credit score is, poor credit loans will automatically to cost you more money than your first mortgage in terms of the interest you pay. However, by keeping the amount you borrow down to a minimum you can also keep that interest rate to a minimum. The less you borrow, the lower your loan-to-value (LTV) ratio will be.
This LTV for a loan is calculated by taking the total amount borrowed (including first AND second mortgage) and dividing it by the value of your home, the value is what the lender says it is worth at the time the second mortgage is agreed.
2. Create a list of poor credit loan lenders who specialize in working with bad credit individuals:
This is where the work really starts by looking for as many bad credit lenders as you can find. Create for yourself a list of at least 3-5 lenders. You most ensure that they are either “poor credit loan lenders” or “bad credit home equity lenders”. These are specialists lenders who know how to look past your credit score, focusing instead on other factors that determine your creditworthiness.
3. Shop aggressively:
This part is probably the part most people fail to do, you must follow through with applying to each and every lender on your list. Then, negotiate aggressively for the best-possible rate. Even in these financial times companies are willing negotiate when they sense that you have other options.
These 3 things will help you secure the best deals on your poor credit loans.