Bad Credit Loans, Bad Credit Home Loans – Bad Credit Finance Australia

PERSONAL finance company MyBudget has continued its rapid growth with two Victorian branches opening and plans to launch two offices in Queensland.

Director Tammy May said the firm’s expansion showed no signs of slowing.

“There is consistently a strong demand for sound budgeting advice and planning,” she said. “The economic downturn at the end of 2008 and into 2009 certainly saw clients turn to MyBudget for help. But no matter the situation, people continue to struggle with managing their money.”

The company now employs 70 staff nationwide to help 6000 clients.

Ms May said January and February had been very busy as new clients sought help with credit repayments from Christmas spending.

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Home-loan repayments are taking increasingly bigger chunks out of the household budget. John Kavanagh looks at the fallout.

The one piece of advice David Bell gives almost all his clients is to stop borrowing money to catch up with overdue bills and mortgage payments. Bell, the co-ordinator of financial consulting at CatholicCare, a counselling service in the south-western Sydney suburb of Liverpool, says playing catch-up with more borrowing is the mistake almost all his clients make.

Bell is one of two financial consultants at CatholicCare; both have had their appointment diaries filled two or three weeks ahead since late last year. He sees a mix of low-income earners unable to manage their credit cards and bills and middle-income earners struggling with big mortgages.

Bell says: “If I could wind back the clock and meet these people six months before they end up in my office I would tell them not to borrow any more money from family members or apply for another credit card. I would urge them to go and see their lender and apply for hardship relief. People usually leave that step until it is too late.”

With interest rates on the rise since October and mortgage repayments higher, financial counsellors are reporting higher inquiry levels. Middle-income earners, who used to be a rarity in such situations, are a regular part of the mix at centres such as CatholicCare these days. And in the current cycle, the group that is showing up in big numbers is first-home buyers who used the government grants to enter the property market.

Bell says the borrowers’ backgrounds or income levels don’t make all that much difference when they have overcommitted to debt.

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Loans for applicants with bad credit – are not impossible despite what you may think.

The main difference between these and clean credit loans are as follows:

- no unpaid defaults must exist.  If you do have any unpaid defaults or an undischarged part 9 agreement, you may not qualify for a loan.

- some real-estate security needs to be provided for bad credit loans.  Maximum loan possible is to 80% of the value of such security property.

Just because you have been declined for a home loan with a bank that does not mean that you can not purchase a home.  There are a number of non-bank lenders that would love to have your business.

Banks are highly regulated and sometimes a small default may prevent you from qualifying.

We have access to lenders who can help applicants currently bankrupt to purchase or refinance a home.  All that you need to have to qualify is a strong income position and a large deposit.  Bad Credit home loans are available only to a maximum of 80% of the value of your home.  You will need to have at least 20% deposit or 20% equity in your property, and we will do the rest.

Rates a little higher with a non-bank lender, however the cost of a lost opportunity may be higher still.

Australian household finances deteriorated in the three months to March, after four interest rate rises in less than half a year swelled families’ bills.

The Melbourne Institute Household Financial Conditions index dropped 16.6 per cent to 28.8 points in March from 34.5 in December, the first reversal after four quarters of improvement aided by half-century low interest rates and cash handouts by the federal government.

People who said they were drawing on their savings in the March quarter rose to 12.3 per cent of all households from 9 per cent in the December quarter, while those saving ”as a precaution” fell to 46.2 per cent from 48.4 per cent over the same period, the Melbourne Institute said.

The Reserve Bank’s four interest rate rises since October have added about $187 per month in repayments on a standard variable mortgage on a $300,000 house after most commercial banks passed on the increases and then some. The central bank has signalled it will raise rates further in coming months as the economic growth rate accelerates.

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If you are a first home buyer with bad credit your chances of obtaining a home loan are rather slim.  The main reason for this, is that most first home buyers have a limited deposit.  However, once you have any bad credit on your credit report you will need to have at least 20% deposit as well as own funds to cover purchasing costs such as stamp duty, legal fees etc.

For a purchase of $350,000 in Victoria,for example – you will need to have over $85,000 of your own funds.  How often would a first home buyer have such a deposit?

One solution if you find yourself in such circumstances is to ask your family for a loan.  If your parents have a paid out home or one with a small mortgage, you could ask them to borrow some of this deposit out of their mortgage and on-lend it to you, the applicant.  If you are one of the lucky ones whose parents can assist, you may be able to qualify.

Caveat loans are short term loans secured by the equity in your property.  They are usually far more expensive than a regular home loan.  The reason for this is that while the lender’s interest in the money’s lent is protected by a caveat placed on your property, they can not force you to repay the loan until your property is sold.

Caveat loans have a set up fee as well as interest rates that range from 2% per month to 6% per month depending on lender.

Generally it is not possible to borrow beyond 75% of the value of your security property.  The lender will also want to know where the money to settle the loan are coming from.

These loans are expensive however sometimes can be worthwhile where :

- you need an amount of money in a matter of days to ensure you do not miss out on a business opportunity;

- the anticipated income from the business opportunity will make the loan set up costs worthwhile.

Note these loans are only available for business purposes.

Spotless financial records, low debtor levels and a clear, easy-to-understand business case are three critical requirements for any SME that wants to get funding from a bank, a panel of business and finance expects has told SmartCompany.

While these expert say access to bank credit remains extremely difficult, companies willing to put in the hard work in preparing their pitch do have a shot at getting the cash they need to fund growth.

The economy might be recovery mode, but the credit crisis is far from over for SMEs. The most recent Sensis Business Index for the March quarter has found 35% of small businesses feel it is still difficult to obtain finance, while the recent results from the big four banks showed business lending fell across the board in the second half of 2009.

Little wonder then that Australian SMEs are having trouble even get in the door of the bank, as was shown by a recent CoreData report which found 25% of business customers who visited NAB had to make contact with the bank more than six times just to get an appointment.

Andrew Inwood, principal of BrandManagement, which owns and operates CoreData, says that while some banks are more open to business customers than others, the market is still very tight.

David Knowles, partner at Pitcher Partners, says conditions are improving but businesses will continue to struggle for some time – and they need to be prepared.

“Things have gotten better but are a long way from where they were since the GFC. Pricing is still way over the top for business loans, the margins are very challenging for smaller companies, especially with rising interest rates.”

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Tighter lending criteria from mainstream lenders has pushed up demand for non-conforming products.

According to the latest Adviser weekly straw poll, 43.3 per cent of brokers have seen demand increase over the last 12 months, while 32.7 per cent believe demand for the products has waned.

Of the 275 respondents, just 24 per cent felt demand had stayed the same.

Specialist lender MKM Capital’s operations and marketing manager Michael Watson said the global financial crisis had forced lenders to tighten their criteria, which has forced more buyers to seek non-conforming loans.

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