Introduction
Having bad credit score can highly influence lenders decision whether to extend lending services to particular borrowers or not. However, having bad credit score does not necessarily mean that an individual can never apply for loan or mortgages from banks or other lending institutions. This is because there are those institutions that specialize on bad credit mortgages. Bad credit mortgages are systems that allow individuals to apply for mortgages despite their credit history. They are very important to those whose applications may be turned own due to their poor credit past.
History
It should however be noted that due to high risks bad credit mortgages are associated with, they usually attract very high interest rates compared to other mortgages. However, the borrower can always lower this interest rates by providing a collateral that the lender may sell to recover the remaining part of mortgage should the borrower default or whatever the reason. This means that the amount of bad credit mortgages that an individual may borrow may depend on the value of collateral provided.
Some lenders may also demand that the borrower provide guarantor before their bad credit mortgages to be approved. The guarantor will undertake to repay the loan should the borrower fail. This may also convince the lender that the borrower is committed to repaying the loan and they may just lower the interest rates for such particular borrowers
Features
Even though there are several lenders who may specialize on bad credit mortgages, locating them may not be very easy for particular borrowers. It may therefore be necessary that one uses the services of mortgage brokers who specialize on bad credit mortgages. This is very useful since these brokers interact with different lenders and may be able to direct the borrower to the best lender depending on their needs.
Despite the high interest rates charged on bad credit mortgages, it usually provides a platform for people to correct their credit scores by repaying them within the stipulated time limits. This allows them access to other mortgages with better terms in the future.
Tips and comments
Since there are very many lenders who specialize in bad credit mortgages, it may be necessary for the borrower to do thorough research before choosing any of them. This may enable the borrower to chose the cheapest lender amongst all of them. However, the cheapest lender may not always be the best as they may have some restrictions that are not suitable for borrowers. It would therefore be advisable for the borrower to seek the advice of mortgage professionals when it comes to choosing the right type of mortgage.
Due to high interest rates charged on bad credit mortgages, they should always b avoided if the borrower can find other alternatives. When faced with the possibility of being declared bankrupt, bad credit mortgages may just provide an individual with the leverage to avoid bankruptcy. It may also provide an individual with funds in cases of an emergency. Despite all its shortcomings, bad credit mortgages may always be the best option for the people whose credit past are not very good to the lenders.
