The credit system is one that works well for banks and lenders as a way to prevent themselves from dishing out loans and not getting anything back in return. However it is not a system that is particularly fair to the customers and from their perspective it is poorly designed.To get bad credit an individual will generally have fairly low funds in the first place. This will mean that they are late paying back loans, miss credit card payments, allow their cheques and debits to bounce or go below their overdraft. In cases where an individual is supporting a family or paying for a home but has insufficient funds, all of these things are fairly unavoidable. It may simply be that the timing of your debits and your pay day mean you are left with no reserve cash for certain periods of time. It is at this point that you most need a loan with a good interest rate, but unfortunately at this point its also the time when the banks will be least able to help you and will charge the most for their services.Getting a home loan or mortgage from a bank then becomes particularly difficult if you have damaged your credit rating. As a risk based business this means that obviously the worse your credit rating and the higher the risk, the more interest you can expect to pay on your loan. On average this will probably range from around 5.5% to 15% (the latter being a worst case scenario). There are however various ways you can lower this number and a few things you can do to improve the situation.Of course one option is not to get a mortgage at all, but to rent as cheaply as possible while you pay off your loans. While this is in effect ‘wasted’ money, it can be a safer option while you build up some savings. While you sit on your loan then, you can also try and fix your credit rating. To do this you will need credit – so get yourself a credit card. Now the secret is not to be tempted to use it to pay off any big loans, but instead to limit it to just one outgoing. For example this might be your petrol. This way you will spend a small but substantial amount on the card each moth, and at the same time you should put the cash aside. When the statement comes through from the credit card company then you must ensure that you pay this off promptly and make sure it is at the top of your priorities. After a year or so your credit rating should begin to improve.Another way to bring down the interest is to save up for a down payment on the home. The larger the lump sum you place on the house, the smaller the risk to the lender; so amass a small amount before you ask for a loan, or even ask parents or generous relatives for a hand. Another option is to buy a house with someone else, this way spreading the risk across two or more parties. Usually this would be a partner, but if necessary you can also move with friends or family.You should also of course make sure to compare rates and to get multiple quotes before you settle on a loan. Make sure you’re not paying any extortionate payment protection insurance on the loan and if you are ask to cancel it and go privately which will significantly lower the interest (and result in more comprehensive insurance).
home loan, credit