A growing number of mainstream lenders are offering loans to people with poor credit records. Read more about it and get some tips on where to look.
If you wanted to borrow money in the old days and you had bad credit, you had to skulk off to some dark, sinister, pee-pee-soaked alley to find the villains who offered them, complete with their appalling small print and shocking interest rates.
OK, maybe things weren't quite that bad, but personal finance is certainly moving on from Dickensian times, at least, as far as mortgages are concerned. Reputable lenders are beginning to offer mortgages for people with bad debt, CCJs or even a past bankruptcy on their file. The best bit is that these lenders have forced sub-prime mortgage interest rates down.
Their expansion into this area is not selfless though. It's a market that has become more attractive for lenders, as it's likely to grow as bad debt figures rise. Also, lenders can charge more for so-called 'non-conforming' borrowers. In addition, it raises the question about responsible -- or irresponsible -- lending. Indeed, the Financial Services Authority (FSA) has expressed its concern at the standard of advice given.
Still, not everyone who has debt problems does so because they're clueless. David Hollingworth of no-fee broker London & Country told me that it's not necessarily going to be difficult to get a mortgage with a mainstream lender, especially if you've simply slipped up in recent years, due to a divorce or unemployment perhaps.
If your credit record is tarnished, I suggest you read up as much as you can before you apply for a mortgage. Check out our Get Out Of Debt centre, which might help you re-jig your finances, so that you have more available for paying a mortgage.
Borrowers often use a mortgage for debt consolidation, but remember, whilst this might bring down your monthly outgoings, it might cost you a lot more in the long run, as you'll be paying interest for many more years. Also, your debt will be secured against your home, so think carefully about whether you can really afford it.
When looking for a mortgage, don't just call up the first company you see advertising on TV or in direct mail. Lots of these companies charge as much as a 3% fee to arrange a sub-prime mortgage, which means they get £4,500 for a £150,000 mortgage! At the risk of being called a communist (again) by one of my colleagues, it seems to me that it's the same old story of higher charges for poorer people -- the impecunious paying for the affluent.
Lots of the best sub-prime mortgages are available through brokers only and not all brokers have access to them. Our mortgage partners, London & Country, are just such fellows as can help you! They search the whole market of more than 8,000 mortgages to find the cheapest and most suitable loan for you.
> Compare mortgages and get friendly advice from London & Country.