The story may sound familiar: in your younger days you had a credit card and you failed to make the repayments on time. After a while, the credit card issuer cancelled your credit card for being a delinquent creditor. Now you have a bad credit history. Fast forward a couple of years and you're a newly married person looking to buy your first home. Only you're finding you cannot; because you have a bad credit history no bank is willing to provide you with a home loan mortgage. If this is the case, all is not lost, a bad credit home loan may be just thing you need to help you out of all your problems.

As the name suggests, a bad credit home loan is given offered to the millions of people who have bad credit histories. Principally they operate in much the same way as all other types of home loans, i.e. either as an interest-only home loan with a bullet principal repayment or as a repayment home loan. Where bad credit home loans differ from more traditional home loans, however, is in the rate of interest being charged on the home loan.

In short, because the lender of the bad credit home loan is seen to be taking a higher risk lending money to someone with an already established bad credit history, they will need to charge a higher rate of interest to reflect the increased risk they're taking onboard. Initially this may seem very unfair, as your previous bad credit history may not reflect your current financial position. However, the fact remains that the rate of interest being charged on your bad credit home loan is likely going to be much cheaper than any alternative form of borrowing you may be able to obtain.

In addition to a higher rate of interest being charged on your bad credit home loan, you should also expect the lender to impose additional conditions on your borrowing. For example, it is highly likely that the lender will ask you to put down a down-payment of the property purchase and this down-payment may well be more than banks are asking your friends with a good credit history to pay. Again, this reflects the fact that you have a bad creditor history and that the lender is taking an extra risk in lending you a home loan.

Also, another beneficial feature of a bad credit home loan is that it may well give you the opportunity to recreate a good credit history. You'll be able to achieve this simply by ensuring that you make your monthly home loan mortgage payments on time each month. If you do this, it will not be long before your credit history starts to show signs of recovering and when this occurs you can then make application to re-mortgage your home loan with another home mortgage lender who is willing to offer you better rates of interest on your home loan than you are currently getting on your bad credit history given your improved credit history status. This way you can take advantage of a bad credit home loan to cure both your financial woes and also to purchase your new home.