Bad credit remortgages, sometimes also called adverse credit mortgages, are basically like normal mortgages and use the equity you have in your home as collateral. They are called bad credit remortgages if the potential borrower has poor credit history.

Normally borrowers that apply for these loans would not qualify for a normal remortgage loan from traditional high street lenders like Abbey, HSBC, Halifax, or Northern Rock.

The only difference between a bad credit remortgage, and a standard mortgage, is that you will have to settle for a lower rate and will have fewer options to choose from.

Remortgage is an expression used in the UK, but these can also be called home equity loans. In essence you can borrow an amount up to the equity built up in your home.

When you apply for a mortgage, your credit score is the most important factor lenders take into account. If you have previous defaults, CCJs, no proof of income, or a previous bankruptcy, you will not qualify got a traditional remortgage.

A bad credit remortgages may be your only option, but you might still get many benefits from one of these loans:

• Pay off small loans and deal with only one lender
• Consolidate your debt and lower your monthly outlay
• Pay off higher interest rate loans with a lower rate remortgage loan
  
• Lower the monthly payment by extending your payment period
  
• Use the proceeds for unexpected expenses, home improvement or pay for your child´s education
  
• Use the funds to repair and improve your credit score
• Most important of all save you money

Generally speaking, you can use the proceeds from a remortgage in any way you want. But remember that it is still a loan and needs to be paid back.

Traditional high street lenders don´t usually cater to bad credit borrowers. There are however an increasing number of lenders specializing in these types of loans. Most of these lenders are backed by large financial institutions, including some of the same high street lenders, and can be found online.

To help you in your search, there are many online sites that work with many different lenders, and will submit your information to several of them in order to find the best deal for you. They are sometimes called mortgage advisers, and some bad credit lenders work exclusively with them.

Once you start receiving proposals from different lenders you can compare and choose the deal that best suits your needs.

You should think carefully before securing debts against your home.  If you fail to make payments on your mortgage your home may be repossessed.

Here are a collection of other articles with personal finance information you might be interested in:

• Things to consider before going bankrupt
• What are high yield savings accounts
• Homeowners insurance tips
• Bad credit home equity loans
• Mortgage refinancing without closing fees