Your credit score is one of the most important barometers of your financial situation since it dictates your ability to get approved for most loans. If you have bad credit, many traditional lenders may not approve you for a mortgage loan, vehicle loan, or even a personal loan.
Fortunately, specialist lenders offer bad credit loans for people who may not have the best credit score. In addition, some bad credit mortgage products can even help raise your credit score as you pay off your loan.
Not too many people are familiar with bad credit loan products, and this lack of knowledge leads to a lot of misinformation getting passed around. Read on for a thorough debunking of four common myths about bad credit loans:
Myth #1: Lenders Never Approve People with Bad Credit
One of the most prevalent myths about bad credit is that it automatically disqualifies you from ever getting any type of loan. The truth is that while a low credit score may not get through traditional lenders such as banks and credit unions, you still have other options.
Specialist lenders and mortgage brokers have created loan products specifically for hopeful borrowers and future homeowners with a less-than-ideal credit history. Loan terms, amounts, interest rates, and other qualifications vary widely depending on what lender you talk to, so it’s essential to do your due diligence.
Myth #2: Lenders Don’t Care About Your Story
Another common myth about bad credit loans is that lenders take one look at your credit report and dismiss you as a bad borrower. However, certain lenders and brokers specifically specialise in helping people with bad credit.
Don’t be afraid to open up about your financial situation with their representatives—they are there to listen to you and help you get a loan that will help you get everything back in order. Your story is especially crucial if your credit history was hit hard by certain life events such as sickness, a death in the family, or a failed business venture. The circumstances around your credit history are valuable information for your potential lender, so make sure you share all these pertinent details.
Myth #3: Lenders Treat All Defaults Equally
Many people think that as long as you have a default on your credit record, no lender will give you the time of day. Again, this is not true. The circumstances surrounding the default are significant. Lenders may be more lenient for defaults under $2,000 as opposed to those over $5,000. If the default on your record is several years old and you have paid it back in part or in full, potential lenders will know that you take responsibility for your obligations.
Again, there is no harm in consulting with a lender about your current financial situation and how you got there. They may surprise you with the lenient loan terms they offer.
People with a bad credit history have limited options if they apply for loans through traditional means. Nevertheless, that doesn’t mean all hope is lost. There are specialist lenders with loan products specifically for people with bad credit. All you need to do is do some research and have in-depth conversations with potential lenders. Soon, you’ll find the best financial option for you!
At Wealthy You, our goal is to not only help you secure a mortgage but also start re-establishing your credit. We are the best mortgage brokers in Sydney, and we offer bad credit home loans for hopeful homeowners. Contact our financial experts and let us help you buy your home today!