There are a number of reasons why you might need a bad debt remortgage. For example you might want to take advantage of lower interest rates, or perhaps you simply need to use the bad debt remortgage as a way to consolidate your rising debts.

Regardless of the reason, securing a bad debt remortgage can sometimes seem like a daunting task. However in the end it's usually much easier than you might think.

Defining bad debt
If you're looking for a bad debt remortgage, then you already know (or at least have a suspicion) that your credit is not exactly perfect. And if you are like a lot of people, though, you might not be exactly sure what this means or how credit is determined.

It's all fairly simple really. Your credit rating is basically a numerical score that is given to you based upon financial reports from your previous creditors. Creditors are those companies who have given you a loan or credit line in the past.

If you have made your payments on time, then your creditors send in a positive report and your credit increases.

However, if you've missed payments or defaulted on your debts (meaning that you didn't pay them back), then they issue a negative report and your credit rating goes down.

The lower your credit rating score is, the more of a risk it's considered to lend you money... after all, if you've had problems repaying your debts in the past then it's reasonable for lenders to think that there is at least a chance that you'll have similar problems in the future.

This makes it much harder to get loans and credit offers, and the ones that you do get usually have much higher interest rates and require some form of security deposit or collateral.

The bad debt remortgage
A remortgage is a special type of loan, used to refinance your home and using that same property as collateral for the loan.

Basically the mortgage lender has a legal claim to the property, so if you fail to repay the loan then they can repossess and sell the house.

A bad debt remortgage is a mortgage loan designed for people with lower credit scores, and is issued on property that you already own (and may or may not still have a mortgage on.) Since the house serves as collateral, you're more likely to be approved for a bad debt remortgage than some other loans... meaning that the bad debt remortgage can be used in the place of the loans that you weren't approved for.

It can also be used to restructure payments on your previous mortgage (since the new loan pays off the old one, and is for a lower total amount) and reduce monthly payments, usually with a slightly lower interest rate.

Conclusion
Finding yourself in a situation where you have bad credit and looking for a remortgage was a much bigger problem years ago. However, now there are plenty of specialist lenders willing to provide you with a bad debt remortgage loan.