Martin Henderson is in a fix these
days. Because of his failure to repay a loan he had
taken a few years back, he has been adjudged as a
bad credit case. And, in spite of much effort,
he has not been able to get a loan or
Lenders do not want to take risk by offering loans
to him, and he is severely in need of money.
This is not a single case. There
are many who are facing bad credit and the
problems resulting from it is making their lives difficult.
Failure to pay the debts in most
cases is unintentional.
Most people are mainly concerned
with the immediate relief that the loan or credit
will offer. They do not want to mar the immediate
relief by thinking of the repayment in future. They
feel that their present income is enough to meet these
extra expenditures. It surely is sufficient to meet
the cost of repayments, until the financial condition
changes for worse, and it becomes difficult to make
the repayments on time.
Some creditors make the payment
terms flexible for borrowers who are going through
financial depression.
Others will wait to see that
the customer mends his ways. If not, then they report
the matter to the credit reference agencies. Credit
reference agencies monitor all actions of the borrower
on his debts in their respective credit file. The
main credit reference agencies are Experian and Equifax.
These agencies record information about the defaults
on loan.
The defaults
being registered in the credit file has serious repercussions
for the borrower. This will impede the borrower from getting loans
in the future. County Court Judgement registered by the County
Courts keep the record of bad credit for a period of six years.
This can be reviewed if the customer pays off the debts within
a month of the judgement. A further delay can make the judgement
irrevocable.
Individual voluntary arrangements are another
form of bad credit that disqualifies customers from getting good
deals in loans and mortgages. Individual voluntary arrangements
or IVAs for short is a step that saves individuals the brunt of
bankruptcy. The individual or the official receiver, trustee or
bankruptcy courts can request the creditor for IVAs. Through this
arrangement, the debtor can sort out an arrangement for the payment
of the debt through a well-defined plan within a period normally
extending to 5 years. Since this is a legal arrangement, both
the debtors and the creditors are bound by it. The failure by
the debtor at any point of time gives right to the creditor to
take action against the other party. Even though IVAs lead to
the repayment of the debt, it tarnishes the credit of the borrower.
However, IVAs are suitable only for those who
believe that they can pay the debt in full by making small monthly
repayments. If not, or if the debt contracted is a sizeable figure,
then bankruptcy will be the only solution. Though more painful
as the borrower will have to lose most of his belongings, this
will free the customer of the debts in the least time (two to
three years is the normal time of repayment). The bankruptcy courts
negotiate the settlement of the debts with the creditors, and
make the payments after liquidating the assets. The credit file
shall however include the name of the borrower among the bad credit
cases for about 6 years.
So just as we plan our work schedule, it is
vital to plan the repayment of the loan or mortgage. A certain
amount of insurance paid along with the loan repayments, will
assure that the loan is paid in full. This is known as loan protection.
Mortgage protection is available similarly to ensure that the
mortgage is paid in full. These will add to the monthly cost but
will offer peace of mind.
Debt consolidation loans can help curb the
menace of debts. Though many lenders reject the loan application,
some are ready to take up the risk. These settle all debts incurred
by the individual through a single loan. However, one must avoid
the bait of taking debt consolidation loans at high rates of interest.
This will only save you from one danger, only to push you into
other.
APPLY
HERE FOR A BAD CREDIT LOAN
Last but not the least comes the debt management
options undertaken by the individuals themselves. One must learn
to live by the limits. Taking too many loans or mortgages will
only worsen the finances.
So, the next time you plan a loan or mortgage,
think twice. Taking advice from independent advisors about the
amount and type of loan or mortgage will go a long way in improving
your financial health.
Summary
Many residents of UK suffer from bad credit
history because of being served CCJs, IVAs etc. This article gives
information about the reasons for bad credit and how one can avoid
being adjudged as one.
James Taylor holds a Master’s degree in Commerce from JNU. He is working as financial consultant for Chance For
Loans. To find debt consolidation loans, debt consolidation loans, cheap rates, personal loans, secured loans, unsecured
loans, improvement loans
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