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With mortgage rates sitting at their lowest in the past many years, the time is ripe to buy a home. But are the banks willing to lend to you?

You may be surprised to discover blemishes on your credit file, without even knowing about it.

Whether a major bank rejected your loan application in the past or you forgot to pay the telephone bill while battling a heartbreak, the banks are quite unforgiving when it comes to enquiries or missed payments on your credit file.

Stuck in a tricky situation with bad credit on your file? You’d be happy to know that there are specialist lenders who are willing to hear your part and help you get a loan even with bad credit rating.

bad-credit-home-loan

What is bad credit?

In case you have missed a utility payment, a credit card bill or defaulted mortgage repayment, these slips are recorded on your credit file and create bad credit on your file.

Lenders utilize your credit report to evaluate how much risk you pose to them if they decide to lend to you. Any blemishes on the credit report (even a single missed payment) can have the lenders turning their backs on your credit application.

Outstanding bills, unpaid taxes, missed mortgage payments, too many credit cards or personal debts, judgements, insolvency, court writs or too many enquiries contribute to bad credit on your file…and it takes 5-7 years for these to get wiped off from the file.

Struggling to make your repayments on time? Contact your lender before they contact you, and seek hardship assistance for your situation. Read here to know how hardship assistance can help you tide over financially distressful times.


Tips to secure a loan, if stuck with bad credit rating

Most people stuck with bad credit rating in Australia are victims of circumstance, grappling with a loss of job, a bad relationship or an illness. Sadly, lenders are conservative in their approach and do not like to lend to high-risk borrowers. This doesn’t mean that you cannot access a home loan if you can explain the blemishes on your credit file or have long since come over your financial troubles.

Seek Professional Help – Before you apply for a home loan, it helps to pull out your credit file from a website such as Veda and check for any black spots. If you spot any discrepancies, it is worthwhile to get them fixed. It may be possible to have some of these entries removed from your file.

Use a mortgage broker – When you are stuck with bad credit on file, it is even more important to get in touch with a mortgage broker. A broker can assess your situation and tell you which lenders are more likely to finance your home. This eliminates the needs to apply to many banks, as all applications count as enquiries on your credit file and rejections don’t make the file look any better.

Another way a mortgage broker can help you is by presenting your case in better light to  lenders. They can explain the reason for your default, increasing the chances of approval. Many lenders assess your application electronically first, and brokers can guide you to lenders who do not employ computerized screening, affording you to personally present your case to the lenders.

Demonstrate good financial behaviour – Even if you have defaulted in the past, demonstrate that you have sprung back through good financial behaviour. Pay all credit card bills, utility payments, mortgage repayments and other debts regularly, on time. Proof of genuine savings (for up to 6 months) and a 20% deposit can go a long way to get your loan application over the line.

Bad Credit Home Loans – Bad Credit Home Loans are offered by specialist lenders by taking into account all aspects of a borrowers situation, especially those that led to bad credit. We understand that tricky life events happen but that doesn’t mean that help is not available. Check out these reduced variable rate and fixed rate bad credit home loan to help you own your dream home sooner.

These loans are available in cases of defaults on credit cards (paid or unpaid), for persons discharged of bankruptcy, for persons who have completed a Part 9 Agreement (entered into with a creditor if a borrower is unable to pay his debt to rearrange the financial terms), for tax debtors (the specialist lenders will add up the pending tax payments into the mortgage so that you only have to make consolidated repayments) and for people with small unmanageable credits (the specialist lender will roll these into a single mortgage product to avoid future defaults).

Bad Credit Home Loan lenders assess your situation on a case-to-case basis. Applying for a Bad Credit Home  Loan can give you a fresh start. The loan comes at a higher rate of interest (considering the high risk taken by  the lenders) and is best utilised as a short-term strategy to overcome current financial difficulties and get on  track with financial planning for the future. Savvy borrowers must make timely repayments and once they have  cleared their credit history, refinance with traditional lenders at much lower rates.

If you think you are struggling to make timely repayments, make a budget and check your spending. Set effective financial goals and only borrow as much as you can afford to repay. You can use online calculators to check your repayments and how additional repayments can help you become debt-free faster.

HashChing helps you on every step of financing your dream home. Contact an expert broker for all your queries and compare hundreds of pre-negotiated deals to get the best rates on your loan.

 

By Vidhu Bajaj,
HashChing Content Writer

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HashChing is helping Australians by providing access to the pre-negotiated home loan deals. Obligation free consultation with one of our partner brokers might save you time, hassle and money.