There are many Brits who are taking out loans and eventually failing to repay the whole or part of it. This adversely affects their credit rating. The number of people with bad credit history is increasing by the day. There is a separate market for these people called sub-prime market which exists along with the mainstream lending market.
Sub-prime lenders provide finance to all those who have bad credit score, county court judgements, bankruptcy, etc. According to Datamonitor, an independent market analyst, sub-prime mortgages are all set to grow faster than mainstream mortgages. It is estimated that by 2011, the sub-prime market will account for up to 10 per cent of the total mortgage market. Here, the chances of default are higher and, therefore, it may cause financial difficulties for the lenders. However, they seek to compensate their losses by charging higher interest rates and imposing strict conditions on the borrowers.
There is a difference between secured loans and sub-prime mortgages. A mortgage is nothing but a secured loan that creates a first charge on your home. It is taken out in order to buy a home. Whereas, secured loans are second charge created on your home for the purpose of borrowing some money. Sub-prime lending includes within its ambit any type of lending whether it is a sub-prime mortgage or a sub-prime loan.
Secured Loans can get you up to £250,000 and you are required to repay this loan amount along with interest in a period of up to 25 years. The exact terms and conditions of the loan may differ from borrower to borrower. A lender considers your monthly income, credit score, value of home, duration and amount of loan required, etc., before offering you any loan deal.
Secured loans present a great opportunity for the sub-prime borrowers. By pledging their homes, sub-prime borrowers can get finance from the lenders. Otherwise, it may become difficult for them to get a loan.
The author is a business writer specializing in finance and credit products and has written authoritative articles about
Personal loans,
Homeowner loans . He has done his masters in business administration and is currently assisting Go4UKLoans as a finance specialist.
