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Adverse Credit Loans - The Facts

Aug 17, 2007
Adverse credit loans are not all that easy to find. Many lenders avoid loaning money to people with less than perfect credit. They prefer to minimize their risks and only lend to those who have a proven credit track record. There are some lenders, though, who specialize in adverse credit lending. These lenders are often called sub prime.

There are many sub prime lenders, but some of them are simply out to make money. These lenders will charge outrageous fees and interest rates just solely make money off the deal. For every bad lender, though, a person can find a reasonable one. It is true that any adverse credit loan is going to come with high costs.

It is very important when looking for adverse credit loans that a person pays special attention to the terms. Some things to look out for are:

- Missed payment penalties. These should be reasonable fees and a person should especially look for a lender who is quick to seize assets upon a missed payment.

- Redemption payments. What these are is to prevent the borrower from paying back the mortgage too soon or going to another lender. All sub prime loans will have them. This is to ensure the lender makes money on the loan. However, the redemption payments should not last for more than two years.

- Interest rates. As mentioned, adverse credit loans will carry much higher interest rates than an average loan. They should not be too extreme, though.

Once you have found an adverse credit loan you will need to do everything possible to ensure you get approved. This involves making sure you provide all of the requested documentation. It also does not hurt to bring proof of any open, good standing accounts you may have that do not report to the credit bureaus, like rent and utility receipts. These may end up helping you get the loan.

Adverse credit loans are not the easiest to get. Lenders do not always feel comfortable giving money to someone who has proved they do not like to pay back their debts. Sub prime lenders are the best place to look. It is not wise, though, to simply go with the first lender who offers a deal. A person should shop around and be choosy even though their choices may be limited.

Having bad credit does not mean a person should be taking advantage of. After all, a person with bad credit is likely to be unable to afford high fees and rates, so banks who push the limits on these things are not looking out for the good of the borrower but rather the good of their own pocketbooks. Adverse credit loans should help a borrower, not hurt them.

For this reason anyone with adverse credit should try and approach a number of different lenders and brokers and compare the offerings of each. The world of adverse lending is a competitive one, so if you do enough shopping around you should be able to secure yourself a reasonable rate and not pay to higher fees.
About the Author
James Copper writes on all areas of finance. He works for Any Loans who offer Adverse Loans and a Remortgage service to UK homeowners.
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