by D. Victor

Created on: June 06, 2010

While it is true that adverse credit mortgages combine the advantages of debt consolidation and remortgaging. It is also true that it combines their disadvantages as well. As a home loan provided for those with bad credit, an adverse credit mortgage should not be a universal panacea. The potential mortgagees must be aware of the pros and cons of the ACR to determine if it can work in their situations.

== Pros ==

*Lower interest rates

While the adverse credit remortgage has higher rates than a standard remortgage, it is a better option compared to other credit facilities such as the credit card. This is because the ACR is a secured loan. Although the mortgagee has bad credit, the fact that it is a secured loan allows the lender to charge a more reasonable repayment rate on the ACR.

*Fewer monthly repayments

One of the advantages of a debt consolidation strategy is the ease of debt management. The ACR makes it easy to keep track of debt b y transforming disparate loans into a single loan, thus reducing several payments into a single, manageable payment.

*Improved credit score

The ACR does not guarantee an improved credit score. However, by making it easier to track and manage your debt, it gives you the opportunity to get a better credit rating once you are able to keep up with the new repayment.

*Access to equity

You want your house to live in, but you need money. Remortgaging means that you do not need to sell your house to access that equity.

== Cons ==

*Different terms from a standard remortgage

As the adverse credit remortgage is for those with bad credit or credit problems, the terms of this type of remortgage might be less favourable.

*Loss of home because of inability to repay the remortgage

As a secured loan, you stand to lose your security if you default on the fault. In the case of the ACR, that security is your home.

* The ACR could increase your mortgage repayment rate

If you took out your previous mortgage when your credit was good, this is a likely outcome of taking a remortgage when your credit took a sharp turn for the worse. Given that you have to lose your original mortgage with any remortgage on the same property, you could be faced with a situation where your new mortgage is less favourable than the old one.

Before making any financial decision, careful consideration is due. With long-term financial decisions, particularly ones based on the exigencies of current circumstances, you should be even more prudent in weighing the pros and cons in the context of your needs.

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