If you own a house and need to raise finance for some reason, equity release finance could provide the perfect solution. Equity release finance is a loan in which you would need to offer your property as collateral.
And in case you already own a home, the loan can be secured against the equity in your home. If the value of your home that you are providing as collateral for the equity release finance is more than the loan amount, then the rate of interest to be paid can be very low.
The amount that you will be allowed to borrow depends on a number of factors that include your credit rating, your employment and financial status, your income, your outgoings, and the level of equity that you have in your home. In case you have a bad credit rating, it might prove to be difficult for you to get equity release finance. Your tarnished credit score may be due to County Court Judgments, Individual Voluntary Arrangements, arrears, defaults, missed payments and so on. But nowadays, with the proliferation of the financial market, many lenders are specializing in giving equity release finance to people with bad credit records.
With equity release finance, you release the available equity of your home and draw money. The amount of equity available, decides the amount that you can borrow. Typically, you are allowed to borrow up to 100% of your home’s value. To find out how much you can borrow against your home, subtract the amount of money that you owe on your current mortgage from the appraised value of your home. With lesser or no equity, the amount you can borrow will be less. With specialised loans called no equity loans, you can borrow more than your home is worth. In some cases you may be able to borrow 125% of your home’s value.
Interest rates for equity release finance will be undoubtedly high as compared to traditional loans. Fees will also be higher in relation to standard loans. The total cost of the equity release finance can vary greatly depending on your credit standing, the lender, market interest rates and the structure of the loan.
Before deciding on a particular loan and lender, it is important for you to compare interest rates and closing costs from multiple lenders. Remember to check the fees, points and penalty fees, which often add thousands to the cost of the loan.
It is true that it is difficult to obtain a personal loan if you have a bad credit rating, but it is not an impossible task. A bad credit rating may be due to arrears, defaults, County Court Judgments, Individual Voluntary Arrangements, missed payments or bankruptcies. Your application might be rejected by high street lenders and major loan companies.
But many lenders have now realised that there is an increasing market for guaranteed loans secured bad credit.
Guaranteed loans secured bad credit not only solve credit problems of the borrower but also gives an opportunity to the borrower to improve his credit rating. Once you start repaying your loan regularly, it gets counted in your credit record and your credit rating advances towards a better picture.
Guaranteed loans secured bad credit will bear a higher rate of interest and a higher down payment than a traditional loan. The factors on which the interest rate will depend include your credit score, collateral offered, loan amount, salary drawn and so on.
There are two basic categories of guaranteed loans secured bad credit: secured and unsecured. For a secured loan, you have to offer your property as collateral whereas for an unsecured loan no collateral is required. If the value of the property that you are providing as collateral for the guaranteed loans secured bad credit are more than the loan amount, then the rate of interest to be paid can be very low. The disadvantage of a guaranteed loans secured bad credit is that the rate of interest is much higher as compared to a secured one but the term of repayment is shorter.
The higher your credit score, the easier it is for you to get favourable terms on your loan. Before applying for a loan, you need to know everything about your credit record. If you have a poor credit record, it is always wise to repair it before applying. It is advisable to try and pay off your outstanding debts before applying for guaranteed loans secured bad credit.
Remortgaging is the replacement of your existing mortgage with a new one. Remortgaging can help you to lower monthly payments, lower the amount that you pay for your home and to consolidate debts.
Obviously an individual will try to take a remortgage at a lower rate of interest. But with fluctuating interest rates in the financial market, you may run the risk of interest rates rising.
People who do not want rising interest rates affecting them can opt for long-term fixed rate loans. Long-term fixed rates such as a consolidation remortgage is ideally suited for borrowers who intend to live in their property for a long term and prefer the security of a constant monthly mortgage payment to help with budgeting.
Many lending companies in United Kingdom like Woolwich, Norwich & Peterborough Building Society, Leeds Building Society and Yorkshire Building Society have started launching consolidation remortgage. Consolidation remortgage lenders are now able to offer much lower rates on long-term loans, making a ten year fixed rate product a much more competitive proposition.
You would want to consider a consolidation remortgage if you want to know
what your monthly payments will be for the next ten years and if you want protection from possible rising interest rates for the next ten years. On the other hand, you would not want to consider a consolidation remortgage if you do not want to pay an upfront fee or you want to pay as little as possible at the start, want the freedom to adjust your payments, i.e., underpay, overpay or even take a payment break, or you want to take advantage of possible reducing interest rates.
However, borrowers attracted by consolidation remortgage should be sure that it is the appropriate product for them. Although many of the loans are fully portable and allow limited overpayments, if you intend to pull out of a deal or break its terms, you could be charged with an early repayment fee, which could more than wipe out any savings you might have made. For people who are not sure what their lives will bring in the longer term, short-term fixes and penalty-free loans may remain the best products.