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Is Buying a Home Out Of Reach When You Have Bad Credit?

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Buying a house can be intimidating for anyone, but even more so if you’ve been struggling lately and your credit has been affected. Maybe you thought about homeownership but were assuming that it wouldn’t be a realistic option because of your financial situation. This might be true in some cases, but is buying a house always out of reach for people with bad credit?

Is it Possible to Get a Mortgage with Bad Credit?

The answer is yes. There are plenty of ways that you could get a mortgage, even if you missed payments before and your credit isn’t stellar. It’s all about knowing where to look and understanding how financing works. Let’s take a look at a few things you can do to qualify for a mortgage with bad credit.

Know What’s in Your Credit Report

The first thing you have to do is know what your credit score is in the first place. This will allow you to not only know what type of mortgage you could apply for but whether your credit is that bad to begin with.

Know that you are allowed to get one free copy per year of your credit report from the 3 major credit agencies: TransUnion, Equifax, and Experian. You will be able to see what’s on your report. You might be surprised that some things you were expecting to be there are not there anymore. That’s because most debt has a statute of limitation. Under British law, all outstanding unsecured debt has to be erased from the report after 6 years.

The next thing you have to do is check if there are any errors there. You could have an account that was settled but still showing. This can have a direct impact on your credit score. So, make sure that you dispute it. Agencies have a clear set of procedures that you can follow to settle a dispute and you will have to show copies of documents that are proving your claim.

Also, know that there isn’t one universal credit score across all agencies. Not only that, but scores can be conflicting. For instance, a score under 560 would be considered “very poor” with Experian but would be excellent with Equifax. In fact, some mortgage lenders don’t use credit scores at all and simply check your file for the presence of adverse credit without applying a numerical rating.

Do What You Can to Improve Your Credit Report

There are a few simple things that could allow you to instantly increase your credit score. One of the easiest would be to get on the electoral roll if you aren’t already. Another thing you can do is reduce your credit utilisation ratio. This is the ratio of debt vs available credit you have. There isn’t a hard number on what the best utilisation rate is, but most experts advise to keep it under the 30% mark.

Now, the best thing to do would be to start paying down your credit card with the highest limit first. Then you can start moving down. Credit utilisation is one of the biggest factors that will determine your credit score.

Next, you could start looking at alternative financial products, like secured credit cards, for instance. These can allow you to rebuild credit and usually have guaranteed approval. These will use an initial cash deposit as collateral for the card. It will also be the card’s credit limit. Use it responsibly and you will be able to improve your credit score if you had a few missed payments recently.

Know the Type of Mortgage You can Realistically Get

It’s also important that you know what you can realistically qualify for before you make your search. You already know that lenders will be more reluctant to offer a mortgage to someone with bad credit. That doesn’t mean that all of them will turn you down. What this often means is that the conditions will usually be different, and you’ll have a smaller pool of products to choose from.

Some may ask you to put a larger deposit down, for instance. This at least allows you to save up and maybe improve your credit at the same time so you can lower it. Others will limit how much you can borrow or will have higher fees.

Another option would be to work with firms that specialise in bad credit mortgages. These are often referred to as subprime mortgage lenders. If you want to know more about these and more tips on how to get a mortgage with bad credit, we suggest you check out onlinemortgageadvisor.co.uk. They run down everything you need to know from what credit issues will be accepted to how much money you may need to put down. They also explain some of the factors that could affect your chances of getting a mortgage with bad credit.

Mistakes You Need to Avoid When Looking for Bad Credit Mortgages

Just because you have bad credit and fewer options, it doesn’t mean you should despair. The first mistake to avoid is going for the first offer you get even if the rate is too high. It’s surprising to see how many people will spend weeks and weeks finding the perfect home but won’t put any effort into looking for the best rate and loan type.

The only way to know how good of a deal you can get is to shop around. Also, make sure that you look at lenders that will perform a soft enquiry on your credit report to see if you have a chance of getting approved first. That’s because multiple hard enquiries on your credit report can end up affecting you negatively. Also, know that companies expect you to do some shopping, so if you do all enquiries within a 30-day window, it will affect your credit score the same as if you went with only one lender whether it’s a hard check or not.

You also have to make sure that you are realistic with the type of home you’ll be looking for. Know that lenders are mandated by law to not lend money over a certain limit, depending on the income. This limit is usually 4.5 times your annual income. For instance, if you make £70,000 per year, you could get £315,000. We also suggest you speak to a broker for professional advice before picking an adjustable-rate mortgage since you may never know in which direction rates will go.

Another mistake you should avoid is systematically closing accounts. Closing some accounts may help you increase your credit score, but some might actually hurt you. For instance, it’s better to keep a credit card active if the balance is low. Closing the account will end up affecting your utilisation rate negatively. Paying loans before their term will not necessarily help you either. It could be a wiser decision to invest that money towards your deposit. This at least will directly improve your chances of getting approved by the lender of your choice instead of getting marks on your credit report.

As you can see, there are plenty of ways that you could qualify for a mortgage even if your credit is not as good as you’d wish. The goal is to look at as many options as you can, try to turn your situation around, and have realistic goals. You also need to have a basic understanding of how credit works so you can adjust your habits.

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How Do I Sell My Vehicle With Joint Ownership?

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A joint auto loan is when two borrowers have rights and responsibility to the same vehicle and loan. If you have a cosigner, then you, the primary borrower, have all the rights to the vehicle. Here’s what you need to know when you need to sell your car with two people responsible for the loan.

Selling a Joint-Owned Vehicle

Joint owners are typically spouses or life partners who combine their income to meet income requirements or get a larger loan amount. Both co-borrowers are responsible for paying the car loan and have 50/50 rights to the vehicle, so both their names are listed on the title.

Since your co-borrower has the same rights and obligations to the vehicle as you, you must get their permission to sell the car. In most cases, they also need to be present for the sale to sign the title. This may not always be the case, though, so it’s important to know how to read your car’s title.

If you have it, take a look at your vehicle’s title for the names listed on the back where you sign to transfer ownership. For example: let’s say your name is Jane and your co-borrower’s name is Joe. You’re likely to see either:

  • “Jane and Joe”
  • “Jane or Joe”
  • “Jane and/or Joe”

If you see “and/or” or the connector “or”, this typically means only one person needs to be present for the sale of the car. But if you see “and” this means both of you need to be present to transfer ownership – this is usually the case with joint ownership.

In all three cases, you still need the permission of the co-borrower to sell the vehicle even if they don’t have to be physically present to sign the title. If you sell it without the co-borrowers consent, it may be considered a crime because it’s their property, too. Moving forward, discuss the sale with your co-borrower to avoid potential legal trouble.

Selling a Car With a Cosigner

How Do I Sell My Car With Joint Ownership?If you have a cosigner on your car loan, then things become easier. A cosigner doesn’t have any rights to the vehicle and their name isn’t on the title. Their purpose is to help you get approved for the auto loan with their credit score, and by promising the lender to repay the loan if you’re unable to. A cosigner can’t take your vehicle, sell it, or stop you from selling it yourself.

However, it’s nice to let them know if you do decide to sell the car because the auto loan is listed on their credit reports. If you can, reach out to them about your plans to sell the vehicle. The car loan’s status impacts them and could affect their ability to take on new credit when it’s active.

If you sell the vehicle and the lien is successfully removed from the title, then you’re both in the clear.

Removing the Lien From a Vehicle’s Title

If you still have a loan on your car, then your number one priority is paying off your lender. Your lender is the lienholder, and you can’t sell a vehicle without removing them from the title – they own the car until you complete the loan. This typically means paying off the loan balance until naturally during the loan term, or getting enough cash to pay it all off at once from a sale.

When you’re selling a car with a loan, you want to get an offer for your vehicle that’s large enough to cover your loan balance and to remove the lien. If you don’t get a large enough offer, then you need to pay that difference out of pocket before you can sell the vehicle. Or, you may be able to roll over the remaining loan balance onto your next car loan if you’re trading it in for something else.

Looking to Upgrade Your Ride?

Many borrowers ask for help to get the car they need. If you need more income on your loan application to meet requirements, asking a spouse or life partner to chip in can do the trick. If you have a lower credit score, then a cosigner with good credit could help you meet credit score requirements.

But what if you want to go it alone on your next auto loan and your credit isn’t great? A subprime lender could be the answer. Here at Auto Credit Express, we’ve been connecting credit-challenged consumers to dealerships with bad credit resources for over two decades, and we want to help you too.

Fill out our free auto loan request form and we’ll look for a dealer in your local area that’s signed up with subprime lenders. These lenders assist borrowers with many unique credit circumstances to help them get the vehicle they need. Get started today!

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Fixed-rate student loan refinancing rates sink to new record low for the second straight week

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Our goal here at Credible Operations, Inc., NMLS Number 1681276, referred to as “Credible” below, is to give you the tools and confidence you need to improve your finances. Although we do promote products from our partner lenders who compensate us for our services, all opinions are our own.

The latest trends in interest rates for student loan refinancing from the Credible marketplace, updated weekly. (iStock)

Rates for well-qualified borrowers using the Credible marketplace to refinance student loans into 10-year fixed-rate loans hit another new record low during the week of May 3, 2021.

For borrowers with credit scores of 720 or higher who used the Credible marketplace to select a lender, during the week of May 3:

  • Rates on 10-year fixed-rate loans averaged 3.60%, down from 3.69% the week before and 4.32% a year ago. This marks another record low for 10-year fixed rate loans, besting the previous record of 3.69%, set last week.
  • Rates on 5-year variable-rate loans averaged 3.19%, down from 3.23% the week before and up from 3.04% a year ago. Variable-rate loans recorded a record low of 2.63% during the week of June 29, 2020.

Student loan refinancing weekly rate trends

If you’re curious about what kind of student loan refinance rates you may qualify for, you can use an online tool like Credible to compare options from different private lenders. Checking your rates won’t affect your credit score.

Current student loan refinancing rates by FICO score

To provide relief from the economic impacts of the COVID-19 pandemic, interest and payments on federal student loans have been suspended through at least Sept. 30, 2021. As long as that relief is in place, there’s little incentive to refinance federal student loans. But many borrowers with private student loans are taking advantage of the low interest rate environment to refinance their education debt at lower rates.

If you qualify to refinance your student loans, the interest rate you may be offered can depend on factors like your FICO score, the type of loan you’re seeking (fixed or variable rate), and the loan repayment term. 

The chart above shows that good credit can help you get a lower rate, and that rates tend to be higher on loans with fixed interest rates and longer repayment terms. Because each lender has its own method of evaluating borrowers, it’s a good idea to request rates from multiple lenders so you can compare your options. A student loan refinancing calculator can help you estimate how much you might save. 

If you want to refinance with bad credit, you may need to apply with a cosigner. Or, you can work on improving your credit before applying. Many lenders will allow children to refinance parent PLUS loans in their own name after graduation.

You can use Credible to compare rates from multiple private lenders at once without affecting your credit score.

How rates for student loan refinancing are determined

The rates private lenders charge to refinance student loans depend in part on the economy and interest rate environment, but also the loan term, the type of loan (fixed- or variable-rate), the borrower’s credit worthiness, and the lender’s operating costs and profit margin. 

About Credible

Credible is a multi-lender marketplace that empowers consumers to discover financial products that are the best fit for their unique circumstances. Credible’s integrations with leading lenders and credit bureaus allow consumers to quickly compare accurate, personalized loan options ― without putting their personal information at risk or affecting their credit score. The Credible marketplace provides an unrivaled customer experience, as reflected by over 4,300 positive Trustpilot reviews and a TrustScore of 4.7/5.

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Provident Financial calls time on doorstep lending business

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Provident Financial has confirmed plans to shut its 141-year-old doorstep lending arm, as its full-year results highlighted the strain the coronavirus pandemic and growing customer complaints have put on subprime lenders.

The Bradford-based company reported a pre-tax loss of £113.5m for 2020, compared with a £119m profit the previous year. The biggest drag was a £75m loss in its consumer credit division, which includes home credit.

Malcolm Le May, Provident chief executive, said: “In light of the changing industry and regulatory dynamics in the home credit sector, as well as shifting customer preferences, it is with deepest regret that we have decided to withdraw from the home credit market.”

Jason Wassell, chief executive of the Consumer Credit Trade Association, which represents alternative and high-cost lenders, said the decision showed that “the current regulatory framework does not work for the market, or its customers”.

“The result in this case is that access to credit will be reduced for hundreds of thousands of people.”

Provident built its name as a provider of home credit, or doorstep lending, which involves a team of local agents who regularly visit borrowers to collect repayments and discuss their products.

Proponents believed agents’ local expertise and personal relationships with borrowers allowed them to achieve better results than traditional bank lending to people with bad credit scores, but the approach has increasingly been superseded by digital models in recent years.

Provident’s business has also been affected by a series of self-inflicted and external difficulties. Its consumer credit division has been lossmaking since a botched effort to modernise the unit in 2017, which led to a pair of profit warnings and an emergency rights issue. More recently, its recovery has been hampered by an increase in customer complaints that prompted an investigation by the Financial Conduct Authority.

The complaints rise has been driven by professional claims management companies, echoing a broader trend across the subprime lending industry which has also affected companies such as Amigo, the guarantor lender. Executives also accuse the Financial Ombudsman Service, which adjudicates on customer complaints, of overstepping its mandate and encouraging huge volumes of complaints.

Provident said it would wind down or sell the consumer credit division, with either option expected to cost it about £100m. 

The move will see Provident exit the most controversial areas of high-cost credit to focus on what it describes as “mid-cost” lending through its Vanquis credit card business and Moneybarn vehicle finance arm. Vanquis and Moneybarn both remained profitable during 2020, despite more than a quarter of Moneybarn customers requesting payment holidays at the height of the pandemic.

The results were slightly better than average analyst forecasts, and the company said Vanquis and Moneybarn had both reported “improving trends” during the first quarter of 2021. Shares in Provident nonetheless dropped more than 10 per cent in early trading.

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