A poor credit rating often means that people are unable to get credit cards, loans and mortgages. They are simply considered too high-risk for a financial institution to deal with them. However, with an increasing population accruing a poor credit rating, there has been a subsequent shift in policy and a branch of financial institutions are now offering such facilities as mortgages and loans to those with a poor credit report.
Why Equity Releases are Easier
If you find that you wish to release some of the equity within your own home, but are worried that a negative credit background will act as a barrier, then do not despair. As the amount that you release will be against a secured equitable interest in your own home it is still possible to get accepted onto an equity release scheme. There may be a few drawbacks to the product created, but with equity releases you do have a product that is based on an asset you have.
You can do a release of equity as a standard mortgage if you are below the age of 55. In this situation you may find more drawbacks than if you were to release equity with retiree products. These equity release plans for over 55s are called lifetime mortgages. The difference is you do not need to make a payment or any interest payment to the loan when it is a lifetime mortgage. With standard mortgages you do, so this can often lead to a few drawbacks.
Higher Interest Rates for Bad Credit
As the scheme will be tailored towards your status as high-risk it may be that the interest rates are higher than they would be for those with a good credit rating. With a standard mortgage the credit rating is always going to affect the interest rate. It will also affect the equity release for over 55s, but again you do not owe that interest. You may be able to get the money you need; however, you do want to be careful about leaving an inheritance behind.
When it comes to higher interest rates, even on equity releases for retirees, you may use up the entire home value in the amount you take out plus the interest that accrues over time. This is due to no payments. Yet, while you are alive, you are able to live comfortably by unlocking the equity.
Choose What Works Best
Do not feel that because you have a negative credit rating you must take whatever is offered. It is important that you shop around to find the best scheme for your needs and one with the utmost protection. This fact does not change because a financial institution considers you high-risk.
You know what seems fair and what is appropriate for you. While you may need money to cover your expenses, you should not forget the most important thing is to ensure you can repay whatever equity release you obtain. You want to be at ease with your choice of equity release, so shop around, compare different products, and find a company willing to offer you a better interest rate despite your bad credit rating.
Finding a Trustworthy Broker
Contacting the Safe Home Protection Plan (SHIP) for a list of reputable equity release providers will give you the utmost protection and rights. It is always advisable that you seek independent and professional advice before signing any contract. Whilst you may be classed as high-risk it is also important that you are wary of financial providers – not all care about your interests. There are a number of providers offering schemes for those with a poor credit rating; therefore, you can afford to shop around.
If you do not feel you are getting all the details or a fair assessment for the equity release you can always go back and look at the list of providers again. When they are found through SHIP, the Equity Release Council or the Financial Conduct Authority most of the time you can feel you are getting proper information. It takes a lot to be on the list and approved, so brokers are not going to allow their credentials to be marred.
You have options even with bad credit. Never forget that your credit can be repaired. Once you have a product to help you out now you can always refinance. With equity releases for over 55s you may not need to improve your credit, but shop around to find a company willing to offer a decent interest rate.