Non-Conforming Loans, Bad Credit Loan, Unsecured Personal Loan

Bad Credit Ratings and Non-Conforming Loans

If you are applying for a non-conforming loan, the chances are that your bank has informed you that you have a bad credit rating. This may come as a real shock to you as for many people the first they've heard that they have bad credit rating is when they have their loan application rejected.

How do you get a bad credit rating?

Every time you take out a credit related contract, your credentials as a borrower are assessed. When you apply for a credit card, register for a car loan, sign on for a home mortgage or even take out a phone plan, you are agreeing to a credit contract. This contract will work in your favour as long as you make the regular (usually monthly) repayments. However, if you start to miss those repayments, your credit rating will be in jeopardy. Usually, the lender will try to contact you to find out why you are failing to meet the repayment schedule, but if they can't get in touch with you, or you continue to default on the money, you will get a black mark against your name. There are companies out there whose sole business is collecting information about individuals' credit histories and selling it on to credit providers like banks and retailers. If you have failed to pay off your credit card debt, or missed covering your mortgage repayments for a few months, they will assess you as a credit risk and you'll find it hard to borrower money from more conventional lenders. This is where non-conforming loans come in.

I have a bad credit rating and I need a loan. What can I do?

Having a series of black marks against your credit rating isn't great news, but neither is it the end of the world. A bad credit history isn't a permanent affliction as payment defaults are usually erased as a matter of course after five years. Having said that, don't think that if you get your finances together and pay off the outstanding debt, your previous bad rating will magically vanish, as future lenders will be able to look back over your credit history and see your defaults.

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How do I move forward?

One very effective way of dealing with money problems is debt consolidation. Debt consolidation works by tying a number of small debts together and covering them with a single, larger loan. If you have equity in your home, one common form of debt consolidation is to use that money to consolidate your other debts, like outstanding credit and charge card bills. It is worth talking to debt advisers to find out the best way for you to move forward and get out of your financial difficulties. In many cases, the best solution is a non-conforming loan.

Non-conforming loans as a financial lifeline.

If you are struggling to get a loan for a new car, to renovate your bathroom or pump cash into your business, all because you have a bad credit history, you need to look at non-conforming lenders. Bad credit does not necessarily mean no loan, but to borrow money you will be required to offer something as collateral against the loan. For many borrowers this means their car, house or even their company. Under these terms, the non-conforming lender is supplying a secured loan, as your failure to repay the loan would result in them taking your car, house, business etc and so their risk is greatly reduced, even though your credit rating is bad. A non-conforming loan may be just the thing you need to help you through a period of financial difficulty and get you back on your feet again.

We do not claim to represent any Australian bank, lender, or financial institution. Thank you for consulting
this overview on non-conforming loans. Copyright 2008
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