Bad credit home loans
A bad credit home loan is a type of loan that is offered from a non-conforming or specialist lender that can consider all situations, in particular for those with default/poor marks on their credit file.
It is designed to separate and help the ‘outside of the box’ applications from regular people who do not meet the bank’s guidelines.
What is considered to be bad credit?
There are many different types of impaired credit. The main types are:
- Mortgage arrears: Missed payments on your home loan. The more the number of missed payments you have had in the last 6 months then the more wary lenders will be. Generally, banks will not refinance your loan if you have missed just one repayment!
- Bad credit history: Adverse listings such as defaults, bankruptcy, judgements, court writs or too many credit enquiries on your Veda Advantage credit file can make your application doubtful.
- Lender credit history: Your past credit history with the lender you are applying for. Lenders have a very long term memory for the customers that they have had problems with in the past.
- Unpaid bills or tax: Outstanding bills such as council rates or late tax bills are a type of bad credit history that may not initially show up on your credit file but may be visible on the supporting documents you need to provide.
- Company in financial trouble: If you are the director of a company that is in financial trouble, receivership or liquidation then this can affect your personal credit history.
- Over committed: If you have too many debts for your income or your total assets are less than your total liabilities then the major banks may assess you as being insolvent or beyond help.
How do non-conforming lenders work?
Non-conforming lenders are far more flexible than the major banks. The interest rates that are offered reflect the risk to the lender. Therefore, the higher the risk of your loan, the higher the rate of interest the lender will charge you.
They will assess your home loan application on a case by case basis and listen to your story as to what went wrong and why you need debt relief. These lenders can often rapidly approve loans to meet deadlines from the creditors.
- Generally if you are borrowing below 80% of the property value then you can get a cheaper interest rate.
- For those of you who are looking to borrow over 80% or if you have had severely impaired credit histories then the rate can be higher.
Can I apply for a home loan with a bad credit rating?
Traditional lenders such as the major banks are unlikely to consider your application for a home loan even if you have a good reason behind the blemishes on your credit file.
However, Solution Home Loans use a unique approach to find the most suitable lender for you that can consider your situation when assessing your application.
Contact Solution Home Loans today, for a free financial health check with one of our Mortgage Broker.