Secured Bad Credit Loans Make Sense
By Gordon Goodfellow
Secured bad credit loans used to be looked upon with some derision in years gone by. Now they make complete sense, and we should be glad. Official UK figures show us why!
According to CreditAction.org.uk 'At the end of December 2005 the total UK personal debt was £1,158bn. Total secured lending on homes in December 2005 was £965.2bn. This has increased 10.4% in the last 12 months.' This is while the average UK household debt is £7,786, and that is excluding mortgages.
Average consumer borrowing via credit cards, motor and retail finance deals has grown five fold in 5 years. Yet the average house price in the UK in November 2005 stood at £186,431 (source: Office of Deputy Prime Minister).
The figures speak for themselves. The much higher interest rates payable on credit cards, motor and retail finance (store cards and the like) are taking a huge chunk out of the average person's monthly budget. The only sensible way forward is quite clear. Consumers need to convert the high interest debt into low interest debt by using their property as security. Even if people’s credit rating is quite poor it makes more sense to pay off the same amount of money at a lower interest rate by means of a secured bad credit loan.
Now new lending sources are springing up which take into account all circumstances. This new market for secured bad credit loans has opened up in the last few years, and it has grown outside of the mainstay of the High Street banks. As long as consumers have property then they can raise as much cash as they like to pay off existing debts. Nor do people have to pay the exorbitant interest rates that used to be the case with people whose credit rating was not perfect.
Would it not make sense to pay £60 a month in servicing that debt than £150 a month servicing exactly the same debt? Secured bad credit loans provide that opportunity.
Improvements in financial risk management assessment mean that lenders are quite prepared to consider secured bad credit loans where they were not acceptable in the past. The self-employed, in particular, are not treated as they used to be, especially with the new attitude towards self-certification. Three years of audited accounts are no longer automatically required from people who choose to work for themselves. People with CCJs, IVAs, those who have defaulted on past or existing credit agreements and even discharged bankrupts are now regularly considered in
today’s changing world of finance.
Increasingly people are taking bigger financial risks, especially those in business and the entrepreneurial minded. The secured bad credit loans market is expanding to take account of that because it has to. Of course, consumers should not consider secured loans if they are not absolutely sure they can meet the repayments. Those people should look at unsecured loans (which are more expensive).
But, as CreditAction.org.uk states, the average value of a house in the UK is '£186,431 (£195,319 in England). UK annual house price inflation rose by 2.5%. Annual house price inflation in London was 2.2%.' Putting all that capital to good use by means of a secured credit loan is an option most consumers would consider, whatever their credit rating.