As reported in the financial headlines of late interest rates on many loans have been rising, and availability of loans has been falling rapidly. This has stemmed from the global credit crunch that swept across the nation last year, which has made it more difficult for lenders to secure finance on the wholesale money markets to fund their lending, and as a result has led to lender tightening up on their lending criteria.
In fact, things have become tough even for those that have decent credit, which means that those with damaged credit, who were already at risk of being rejected by mainstream lenders even before the credit crunch, need to be really careful. It is important to remember that in the current financial climate the likelihood of getting a loan from a mainstream lender is highly unlikely, and what you need to do if you have damaged credit is to focus on lenders that offer credit to those with damaged credit. There are a number of lenders that specialise on this type of credit, and by ensuring that you opt for one of these you can reduce the chances of having your loan application rejected.
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The likelihood of rejection for a loan will depend on the extent of damage to your credit. If you have very bad credit then you may find that the only option for you is a secured loan. Secured loans are those that are secured against an asset, which is usually the home, and they are therefore only available to homeowners. A number of lenders offer secured loans, even to those with damaged credit, because they have some form of collateral, which makes the loan a lower risk.
If you do decide to go for a secured loan there are a number of things to bear in mind. Firstly, the loan is secured against your home, and this means that you could risk losing the home if you default on loan repayments. Also, remember that the amount you can borrow will depend on a number of factors, such as your credit and financial status, and also the level of equity that you have in your home.
There are also a few unsecured lenders that will consider offering loans to those with damaged credit, although this will again depend on the level of damage to your credit. With an unsecured loan you are not securing your loan against any asset, and therefore do not have to be a homeowner. However, if you do default on repayments your credit will take another battering, making life even more difficult in the future.
As someone with damaged credit you should not expect to be able to get the most competitive rates of interest on the market when you take out a loan - your interest rate us likely to be significantly higher than the interest rate for someone with good credit, and this reflects the risk to the lender. However, as your credit improves over time you will find yourself available for more competitive and affordable deals, so it is important that you do not default on loan repayments once you have taken out the finance that you need.
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