Bad Credit Loans - People With Poor Credit at Risk in Current Climate

We can't escape the fact that as the liquidity crisis continues and lenders tighten their criteria/ lending limits, the people who are suffering the most are those with poor credit histories, who took bad credit loans out in the past.

Even as little as two years ago lenders were prepared to offer customers with poor credit history competitive rates on their mortgages up to 90% of their property value and sometimes even higher, on an interest only basis.

Now those customer are coming to the end of the initial deal period and are having to remortgage only to find that lenders no longer offer such high level LTV borrowing and if they do it is at much higher rates than previously available. What we are now finding is that some borrowers are having to stay put with their existing lender and take the hit of having to make much higher payments on their lenders Standard Variable Rates.

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What is more worrying is that this increase in the monthly payment is eating up most of the customers disposable income, putting them in a very risky situation whereby if they are unable to maintain those payments they could fall behind on their mortgage and possibly lose their home by repossession. The industry has found itself in this mess by offering bad credit loans whilst the interest rates were at their lowest, but by leveraging the mortgages so high against peoples income without thought to how the debt would remain affordable if the interest rates increased or a crisis such as the one we find the industry in today took shape.

The industry has undergone a sharp learning curve when it comes to bad credit loans, and now lenders are becoming ever more strict with their lending criteria when it comes to customers who have poor credit histories. The industry cannot afford to go through a crisis like this again, which will certainly mean reigning in the purse strings when it comes to high risk lending in future.

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