An adverse credit loan is a loan for people with, for example, defaults, county court judgements (CCJ's), mortgage arrears or ex-bankrupts or IVA, these can be either secured or unsecured.
If you are a home owner they are usually secured on your home (it is effectively an adverse credit home owner loan) and can be used for any purpose and can be for any amount from £1000 to £1 million.
How they work is that they are usually secured against the equity that you have in your house, meaning that the actual amount that you can borrow is determined solely by the amount of equity that you have available.
However, depending on your personal circumstances, you may be able to get an adverse credit unsecured loan although you need to be prepared for the higher interest rates compared to the secured loan.
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What is adverse credit ? Adverse credit occurs when a borrower has had previous problems with credit, for example county court judgements (CCJ's), bankruptcy or mortgage arrears etc. County court judgements are awarded against a person who has not satisfied their debt payments with their creditors. Once the ruling has taken place it will be recorded against the person's credit history and will appear every time a credit search is done for the next seven years.
If a person has a county court judgement against them then it will have to be “spent” before they can get a loan or mortgage, which may then be at a higher than normal rate for unsecured borrowing, or lenders may only lend on a secured basis (i.e the adverse credit home owner loan mentioned previously on the page).
Bankruptcy occurs once a person has surrendered the required assets to a court appointed individual in order to pay his/hers debts. Mortgage arrears describes the amount the borrower is behind in his mortgage repayments schedule. The amount is usually measured in either pounds or months.
Since an adverse credit loan is usually secured, they can also be referred to as an adverse credit home owner loan.
People with a bad credit history are more likely to be accepted when specifically applying for an adverse credit loan because although they may be more expensive or may need to be secured, you are more likely to be accepted because the lender has already decided to accept the increased risk.