Adverse Credit Homeowner Loans
Adverse credit homeowner loans – for people who have a poor credit background but own their own home – are more expensive than if you had a perfect credit score, but can offer better rates than adverse credit tenant loans, which offer no surety to the lender and are therefore seen as a higher risk.
Reasons for adverse credit homeowner loans
There are various reasons why homeowner loans can be useful for those with adverse credit:
- They can be used for any purpose
- Provide a way to borrow for people who cannot get other credit
- Allow people to borrow higher amounts than tenant/unsecured loans
- Can help you rebuild your credit rating
While adverse credit loans are more expensive than loans for people with good credit, the huge number of people requiring adverse credit homeowner loans has meant that a growing number of companies offer more competitive adverse credit homeowner loans, and there are some companies which specialise in them.
Downsides to adverse credit homeowner loans:
Although unsecured loans generally have higher interest rates, you do not have to risk your home in order to get credit. However, if you have a very poor credit history, a homeowner loan may be your only option, as lenders will see you as a high risk borrower so will want security before lending to you.
Disadvantages of adverse credit homeowner loans include:
- Your home is at risk if you default on payments
- Higher interest rates than good credit loans
- Rates are often variable which could make the loan more expensive than you first thought
- You could cause further damage to your credit if you default
- Early repayment of the loan can incur fees
Questions to ask before taking out an adverse credit homeowner loan
If you are thinking about taking out an adverse credit homeowner loan you should first consider the following:
- Can you get a secured loan instead?
- Can you afford to repay it?
- Do you really need it?
- How much do you really need to borrow?