Bad Credit Home Loan?

Can you get a home loan if you have a bad credit history?

Can you get a home loan with a bad credit history?

The answer is of course yes, but you will probably end up paying more. Bad credit can come in many forms county court judgements (CCJ's), late payments, divorce bills, you've been made bankrupt in the past, have too many credit cards, maybe a business you had has been foreclosed, you are self-employed and have no fixed income and maybe you owe the IRS, customs and excise or inland revenue a lot of money to name just a few. Once you have got yourself a bad credit history it can be a downward spiral. You find yourself needing to borrow money or perhaps consolidate your other loans into one manageable amount but are forced to accept a higher interest rate than someone with a good credit history.

Can anything be done about this?

Well, unfortunately the financial establishment works on risk assessment. The higher the risk of the home loan not being repaid the higher the interest rate. This is why home owners can obtain lower rate loans than non-home owners. If the home owner secures his or her loan on the equity then if they default on the payments the bank, building society or loan lender could either sell or force the debtor to sell the house to pay back part or all of the amount owed.

What is the difference in APR between someone with a good and bad credit history?

I decided to see how much it would cost me to borrow $1000, $10000 and $100000 with and without bad credit

A quick search on the net later showed the cheapest options (I didn't actually apply for any of these loans and so the offers were only provisional and are shown as examples and therefore you not assume you could borrow the same amount for the same rate), assuming I had an 'good' credit history, were (with the retail price index in the UK at 2.4%).

Amount borrowed £1000 over 5 years

  • Northern Rock 5.8% - £1150 repaid
  • Leeds BS 6.9% - £1180 repaid
  • Zopa Loans 7.5% - £1195 repaid
  • If I have a 'fair' or middle of the road credit history the best I can borrow money is

  • UCC 17.9% - £1478 repaid
  • Personal Loan Centre 45.8% - £2258 repaid
  • No one else would touch me.

    If I had a 'poor' credit history then things got worse

  • UCC 50.4% - £2386 repaid 
  • Personal Loan Centre 64.3% - £2766 repaid
  • My details to get a fair rating were one very old CCJ, non-home owner, self-employed with no other outstanding debts. A quick look at the prices for £10000 over ten years and £100000 over 25 years told me the figures were ridiculous.

    Making myself a home owner allowed me to borrow from more people at a much lower rate. Typically I could borrow money at the same rate as someone would an excellent rating.

    The rate did go up if my rating dropped from fair to poor for example

    Amount borrowed £10000 over 10 years - Credit: Fair

  • Firstplus 5.8% - £13113 repaid
  • Clickloans 7.7% - £14207 repaid
  • A&L 7.9% - £14324 repaid
  • Amount borrowed $10000 over 10 years - Credit: Poor

  • Ocean Finance 10.9% - £16119 repaid
  • Personal Loan Centre 64.3% - £51050 repaid
  • As you can see the options and payback amount decrease significantly with previous debt and it really is a vicious downward spiral. Most lenders will not touch you.

    What's the best advice for someone with a bad credit history?

    Well shop around there are loads of sites that will compare the price of loans, mortgages and credit card rates and they are getting better and better at giving you realistic rates based on your circumstances. I would predict that as more and more people get in serious credit problems that the rate at which you can borrow money with a poor or bad credit history will decrease as more lenders offer it as an option, but it will never be as low as someone with a good credit history.

    Best Buy Personal Loans 

    Check out the table below for the current Best Buy Loans, as researched by MoneyExtra



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