Having a bad credit rating can seriously affect your chances of being offered a home loan by the majority of traditional lenders as it essentially classes you as a high risk borrower with an increased likelihood of defaulting upon your payments. However lenders are becoming increasingly more willing to offer loans to the traditionally higher risk borrowers.

If you have a bad credit score and you wish to avail of a home loan it is still possible but you are advised to follow these steps to ensure that you get the best home loan deal. It is an area of the lending market which can too often be characterized by predatory lending practices and so needs to be fully explored before committing to anything.


Never take the very first loan that you are offered. With a whole host of loan comparison websites available you can easily research the different loan packages available to you. It is also a good idea to contact your bank as they already know you as a customer and therefore may be able to offer a better rate than a lender which purely bases its appraisal of you on your bad credit score. Another area of financial lending which should be researched is credit unions. These are often more willing to discuss loan options and lend to you as an individual not just as a credit reference number. Their criteria are not as rigid as traditional banking loan criteria.


The best way to get a more competitive home loan rate may be to provide some security or collateral which the loan can be taken against. This may reduce the interest rates as it will mean that the lender is essentially taking less risk with lending to you as there is an asset against which the loan is secured. It is important to understand the seriousness of using an asset such as your home for security. In the event that you default upon your payments you will then be placing this asset at risk. This could in a worst case scenario leave you and your family without a roof over your heads.


You should never commit to any financial contract without first seeking independent legal advice on the matter. This is even more important for customers who have already struggled with debt management.

Repair Credit Rating

It is possible to repair your credit rating over time and this should always be viewed as important as it will increase your chances of more favorable loans further down the track. One way is to open a new bank account geared towards those with bad credit. Generally such an account will not have either an overdraft facility or a credit card attached to it. Then make sure that every month your income goes into it and all of your repayments which are due are paid in full and on time. Over time your financial responsibility will help to repair your bad credit rating.

Think Twice

One key thing to consider before taking out a home loan is to make sure it is necessary. If you already have a bad credit score adding new forms of credit will only worsen your score unless you have learned how to deal with repayment in a responsible manner. It is often also the case that just because a lender is willing to offer you a home loan does not mean you are ready for it. Think twice before committing to any contracts and if you are unsure talk to a local credit counseling service about your reasons for needing a loan. They may be able to show you other areas of your life in which you could make changes in order to meet loan repayments.

The most important thing to remember when searching for a home is that even with a bad credit rating you are still entitled to the best deal you can possibly get. Therefore do not feel it is necessary to take an extremely high interest rate or tough loan conditions without first taking independent financial advice and exploring all of your options.

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Getting Home Loans When You Have Bad Credit
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