If you have some issues on your credit record, you might need to ask a special type of lender for a home loan. These lenders often ask for higher interest rates if your credit is not so good. But why do they do that, and can you switch to a bigger bank later for a better rate? 

Why do these lenders ask for more money?  

These special lenders take more risk when they give loans to people with not-so-great credit. So, they ask for more money (higher interest rates) to balance that risk. These lenders are not regulated like big banks. They might approve cases where people made a mistake once and are less likely to have problems compared to those with no bad credit. They might say yes to cases with things like multiple credit checks, missed payments, past bankruptcy, and other money troubles. 

How much extra will you pay?  

On average, these special lenders ask for around 2-2.5% more in interest rates for bad credit. The amount you pay extra depends on what kind of money troubles you had and how long ago they happened. 

Remember, getting a loan with bad credit might only be a short-term fix. Depending on your money troubles, you might be able to switch to a big bank as soon as six months after you get your loan. But for most people, it might take 5-7 years before they can switch. 

Can you ask a big bank for a loan right away? 

 Usually, people with a bad credit history need to go to a special lender to get a home loan. Big banks are usually more careful and might not give loans to people with bad credit. But if your money troubles are small and only happened once, some big banks might say yes. How you ask and which bank you choose are really important. That’s where a special mortgage helper can be useful. 

What are special lenders? 

 Special lenders are not big banks. They give loans to people who can’t get them from big banks. Some examples are Pepper Money, Liberty Financial, ME Bank, Mortgage Ezy, and Firstmac.