“Even if you have been declined a loan elsewhere, you may be given the go-ahead for one of our adverse credit loans from our top lenders. We offer a wide variety of products; loan amounts, and repayment terms. Our professionals will do their best to find the most suitable product for you with the lowest interest rate possible.” These are some of how these loans are portrayed to people every day.
There are two types of loans available, secured and unsecured loans. Secured loans are mainly for homeowners because the borrower uses their home as security or collateral against the loan. This is a relatively low risk for the lender because they are protected in the event of the borrower’s inability to repay the loan – the result is that interest rates are lower for secured adverse credit loans. Unsecured loans require no pledge of collateral to secure the debt, but interest rates are higher because this represents a higher risk for the lending company. Here is a previous post that goes into more detail about these two types of loans. For more, please click Loan Types.
Perhaps you are considering adverse credit loans because you want to consolidate debts from credit and store cards and other loans. If you find difficulty meeting your monthly repayments to your creditors, then a debt consolidation loan could be an option. You may be able to reduce your monthly repayments to less than the sum of your current debts, but you will be paying for a lot longer. These loans also help to reduce the pressure you may be under from your existing creditors and leave you with just one creditor to deal with. Before you find out how much adverse credit loans will cost you, you’ll need to determine exactly how much you owe. Ask your creditors for settlement figures and not balances. The total must include any early redemption penalties, an amount charged by some creditors if you settle your debt before the initially agreed due date of the loan.
You must make sure that you can comfortably cover the repayments on adverse credit loans, or you will be putting your home at risk of repossession to repay the loan. A basic monthly income and expenditure will also help to give you a clear picture of your financial situation. Don’t forget to include an amount for emergencies and unforeseen expenses.
Being familiar with the different ways lenders refer to interest rates will help you make the right choice of adverse credit loans. The percentage you are charged monthly by the lending company is called the Annual Percentage Rate or APR. Although lenders quote typical rates, these are only indications, and the APR you are offered will depend on the type of loan you get, secured or unsecured, the loan amount, the term, and the lender’s flexible assessment of your situation and ability to repay the loan as initially agreed. You will also come across fixed and variable interest rates. Fixed rates mean that your monthly repayments are set at the outset and will remain unchanged regardless of the bank base rate. Variable interest rates on adverse credit loans could cause your monthly repayments to go up and down as the bank base rate fluctuates. This could make it difficult to stick to a budget, but you will benefit if interest rates drop. If they increase, your loan could cost you a lot more.
A lot goes into an ARM, and before you decide on one, you need to know and understand the basics of this instrument. For more information on ARMs, please visit the following link to a well-done article at Bank Rate.
It is important that you thoroughly understand any loan’s working before you agree to sign the loan documents, or you may be surprised at what could happen if rates change or you try to pre-pay the loan. Also, it is important to have a budget to work off of when figuring what loan payment will fit your finances and allow you to still spend on other items that may or may not be necessities for you and your family to live. For a comprehensive set of Excel financial spreadsheets that does include an amazing budget tool, visit Excel Suite.
If you need assistance with budgeting, understanding your loan, or general financial planning, reach out to me directly if you are in or near the Metro-Nashville area. If you are not in Tennessee or not comfortable with a virtual relationship, seek out a qualified fee-only Registered Financial Consultant (RFC) near you.
