All You Wanted to Know of Bad Credit
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 a mortgage. 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 or mortgage.
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.
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.
James Taylor holds a Master's degree in Commerce from JNU and he is working as financial consultant for chanceforloans.co.uk To find a Personal Loans, bad credit loans, Debt Consolidationthat best suits your needs visit http://www.chanceforloans.co.uk
MORE RESOURCES:
 China Daily | Stock markets end week of credit crunch worries Newsday, NY - Credit-crunch worries continued to weigh on US stock markets Friday, but the hemorrhaging evident for most of the week was contained. ... Video: Stocks Fluctuate After Fed Corporate Debt Plan Paulson OKs Bank Stock Purchase Plan Easy credit and financial crisis |
 AFP | Tighter credit card limits add to woes MiamiHerald.com, FL - Now credit cards may become the next focus of the credit crisis. BY FRED TASKER Maria Osorio, 62, of Sunrise, never meant to run up her credit cards the way ... Credit Crisis Collapse What Happens Next? Regional financial experts focus on lending; say credit crunch is ... Market news this week for strong stomachs |
 Boston Globe | Global leaders seek answer to credit crisis San Francisco Chronicle, USA - At the same time, loan markets everywhere remained broken, especially the critical wholesale credit markets, in which financial institutions lend each other ... Video: Bernanke: More Economic Pain Ahead TREASURIES-Surge in Europe as shares skid on credit woes Stocks down despite government moves to free up credit |
 The Associated Press | US will work with partners on credit crisis: Bush CBC.ca, Canada - It was the 21st time in 26 days that the president has spoken publicly about the credit crisis gripping financial markets and dragging down stock markets. ... Meeting G7, Bush Vows World Economic Fix |
 China Daily | Lehman Credit-Default Swap Payout Could Climb as High as $365 Billion Washington Post, United States - By Heather Landy NEW YORK, Oct. 10 -- In what may shape up to be the most expensive payout ever in the credit-default swap market, sellers of insurance ... STOP FINANCIAL WMD'S: Credit Default Swaps Insurance on Lehman Debt Is the Industry’s Next Test Lehman Credit-Swap Auction Sets Payout of 91.38 Cents (Update1) |
Is my credit union safe? Los Angeles Times, CA - By E. Scott Reckard, Los Angeles Times Staff Writer The government-run National Credit Union Share Insurance Fund insures most deposits at credit unions, ... Got Your Money in a Credit Union? You Too Are Safe In tumultuous financial times, credit unions might be an option to ... LETTER: Your money is safe with credit unions |
Fears Grow That Tight Credit Could Crush GM, Ford NPR - Standard & Poor's downgraded the credit of both companies and their financing arms this week. AFP/Getty Images Ford F-150 trucks sit at a dealership in ... Video: Money Minute: GM, GE, Oil GM, Ford too big to fail? CREDIT WATCH HITS GM, FORD |
Financial troubles spread to credit unions Los Angeles Times, CA - By E. Scott Reckard, Los Angeles Times Staff Writer It's not just giant banks on the brink these days: Losses are clobbering nonprofit credit unions that ... |
 New York Times | Credit cards, credit crunch: consumers feel pinch as issuers `go ... Newsday, NY - The credit crunch and weak economy also are taking a toll on credit cards. Perhaps you have noticed that you're receiving fewer offers for credit cards in ... Your Money One Thing You Can Control: Your Credit Score |
 Boston Globe | Transcript: President Bush's Radio Address FOXNews - The Fed has joined with central banks around the world to coordinate a cut in interest rates — a step that should help free up credit. ... Text of Bush's remarks Friday on the economy Comprehensive strategy to tame crisis: Bush Bush says financial rescue plan big enough to work |
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