If you wonder how to make a sub-prime secured loan application, the answer is ‘very cautiously.’ Subprime loans are loans given to individuals considered credit risks for a range of reasons. Low income and late payments of bills can lead to being included in this category. Approximately twenty-five percent of all loans in the U.S. are sub-prime. Since lenders charge much higher interest rates for sub-prime loans to the very people who can least afford high rates, it is no wonder that many people who have been sweet-talked into these loans are losing their homes. This is not to say that it is never a good idea to make such an application.
If you have ever been declared bankrupt or have entered into an Individual Voluntary Agreement, the only mortgage you are likely to get a sub-prime mortgage. The worse your credit history is, the more sub-prime you will be considered and the higher the interest rate you will have to bear. Although the UK subprime market is not the same as America’s, the arrears rate on loans is twenty times higher on subprime mortgages than on prime mortgages.
The only thing protecting many people from financial collapse is the steep rise in housing prices over the past decade, which has given them equity to draw on or capital gains at the sale. The subprime debacle in the United States has a lot to do with low start adjustable interest rates, rising after an introductory period to high subprime rates.
This is less of a problem in the UK. However, you must be fully aware of the terms of a loan before you make a sub-prime secured loan application. Don’t be so desperate to borrow that your only concern is how to make a sub-prime secured loan application. It is much more important to ensure your long-term financial security.
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Having said this, some situations warrant making a sub-prime secured loan application. If you have the opportunity to purchase a property significantly below its market value and can resell quickly with minimal outlay, then a sub-prime mortgage may be the answer. However, bear in mind that things can go wrong, and it may take longer to sell than you thought. So you still need to negotiate the best interest rate you can within the sub-prime market. You don’t have to worry about making a subprime mortgage application; you apply for a mortgage loan, and the bank either designates your application as prime or subprime.
