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Guide to options if you've been refused a loan or credit. If you've been refused a loan or credit, or you're worried that you might be, you can check the information that's kept about you. If it's wrong you can ask for it to be corrected. If the information is correct and you're worried about your debts you can get free help. Options if you've been refused a loan Please fnd below a decription of the main methods to clear debt in the UK IVA (Individual Voluntary Arrangement) if you are refused a loan If you have enough money left over after paying your priority creditors and essential expenses, you may be able to arrange an Individual Voluntary Arrangement (IVA). An IVA is a legal agreement with creditors (usually non-priority creditors) to repay your debts. This could either be in part or in full. The arrangement is negotiated, written up and checked regularly by an independent solicitor or accountant called an Insolvency Practitioner. Not all the creditors have to agree to an IVA as long as the creditors to whom you owe 75% of your debt agree. Debt Managment Plan to clear debt if you are refused a loan If you have enough money left over after paying your priority creditors and essential expenses, you may be able to arrange a debt management plan. A debt management plan is an arrangement with your creditors to pay back the debt by regular instalments. Instead of you speaking to your creditors yourself to arrange the plan, a Debt Management Company (DMC) does it for you. Usually you have to pay for this service although there are some DMCs who will do this for free. Bankruptcy to clear debt if you are refused a loan If you have a debt problem, you might have a number of options for sorting it out. One of these might be bankruptcy. Protected Trust Deed to clear debt in Scotland if you are refused a loan A trust deed is a formal arrangement with your creditors, used in Scotland where a debtor grants a deed in favour of the trustee which transfers their assets to Provided certain conditions are met, the Trust Deed may be registered as "protected", thereby preventing creditors from petitioning for the debtor's sequestration or taking any other steps to recover debts due to them. Financial and personal circumstances vary, so the consequences of signing a Trust Deed will be different for each individual or partnership. Remortgage if you are refused a loan If you have enough money left over after paying your priority creditors and your essential expenses, you could think about taking out a loan to pay off your non-priority debts. This is called a consolidation loan. You can use a consolidation loan to pay off things like credit card debts and loans. What to do if refused you have been refused a loan Adverse credit means you're not a candidate for a prime borrowing rate. Depending on your credit black marks and the individual policy of the lender you could be treated as near prime, but if your credit unworthiness is severe you're very likely to be designated sub-prime. The first step is to seek independent financial advice from a mortgage broker. Interest rates (usually starting a couple of percentage points above the lender's standard variable rate) can vary significantly in the sub-prime market depending on the severity of the adverse credit rating. There's also the possibility of a higher-lending charge, often charged on loans of more than 90% of a property's value. And a reasonably friendly interest rate can come attached to a hefty repayment charge (eg 6%) on redemption. This is something to keep in mind if you plan to tough out the increased cost of a sub-prime mortgage for two years, say, using it through assiduous repayment as a chance to repair your credit rating. Borrowing money in the form of a secured loan is also possible under adverse credit. However, you should assess carefully the terms and conditions attached to the loan (they are binding) and be 100% certain of your ability to repay. Although they tend to be granted quickly and are generally easy to obtain by those with blemished credit ratings, secured loans give the lender security, not you. If you default the lender can forcibly sell your house (the security) to recover the loan. If the amount of money you need is relatively small (eg £10,000) a personal unsecured loan could prove the best option. You will have to shop around and the interest rate will be higher than the advertised headline rate. The risk here is that, if turned down, think hard before approaching other 'good deal' lenders, as each will search your credit file, leaving behind a footprint. Your adverse rating could become even more adverse. The lender has checked the system and discovered an adverse credit rating against your name, a financial blemish you were possibly unaware of or had long forgotten. Such a poor credit rating shouldn't, though, prevent you from borrowing the money you need; but it will make it more expensive. PLEASE CALL 0845 612 2626 FOR MORE INFORMATION |