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

Home Loans that are in arrears by more than 30 days and secured by Australian prime residential mortgage-backed securities (RMBS) declined to 1.52 per cent last quarter, indicating some improvement in the health of the home loan market.

According to the latest Standard & Poor’s report, bad credit home loan arrears also fell by 127 basis points to 10.38 per cent during the same period.

“The decline in home loan arrears point to evidence of recovery after weather-related disruptions in early 2011,” Standard & Poor’s credit analyst Vera Chaplin said.

“We expect Australian RMBS mortgage portfolios’ performance to remain stable, supported well by the Australia’s positive economic prospects and continued strong labor market.

“However, the potential flow-on effect of economic and financial market uncertainties in the eurozone to Asia Pacific region could weaken Australia’s currently positive economic outlook and undermine consumer and business confidence.

Many borrowers are baffled when their loan application is declined by a lender. Most lenders will not provide a reason leaving the applicant with no clues as to where to look. If you have found yourself in this situation, there are things that you can do to clarify your situation.

1. Can you afford the loan you are applying for?

If you have just made an application for a car loan , a personal loan or a home loan, it may well be that your income is not sufficient in the eyes of the lender to qualify you for the loan. You can run your scenario through a “how much can I borrow” calculator online to see even approximately if your income is enough to qualify you for the loan;

2. Do you have some bad credit history or excessive loan inquiries?

You can perform your own credit check online for free to see what a potential lender sees when you make a loan application.

www.mycreditfile.com.au is the site to visit for a free credit check.

Note that if you approach others to run a credit check on your behalf it may adversely affect your chances of qualifying for a loan. Most lenders will decline an application if you have unpaid defaults. judgements, bankruptcy or even too many loan inquiries on your credit report.

Bad credit should not prevent you from qualifying for a secured loan but you will need to approach second tier lenders – your banks is unlikely to accept such a loan application.

3. Have no financials to substantiate your income?

While you may qualify for a low doc home loan or a low doc car loan, there is no such product as a low doc personal loan.

Therefore if you have some bad credit, and you are looking for an unsecured bad credit low doc personal loan – unfortunately such loans simply do not exist.

There is expectation across the board that interest rates will be coming down a number of times during 2012 – the first rate cut is expected in February.

As home loan rates begin to ease, overextended borrowers will be able to breathe a sigh of relief. Rates will be reduced not only on home loans but also car loans, personal loans and credit cards…making it easier for families to stay afloat.

While 2011 had brought 2 interest rate reductions only towards the end of the year – it was enough to make a difference to many families carrying significant levels of debts. Borrowers have been on a look out for debt consolidation opportunities with many looking for a well priced fixed rate mortgage which allows them to consolidate unsecured debts in to the loan.

Further reductions to interest rates should bring further mortgage stress relief which is very much in demand.

According to Fitch Ratings, mortgage arrears in Australia had declined midway through the year as interest rates on home loans especially fixed rate home loans began to come down.

Figures released to the market yesterday show that mortgage arrears were down to 1.42% of all home loans in September, after being recorded in May this year at 1.77%.

Fitch Ratings believe that greater stability in the interest rates is mostly responsible for this decline.

While overall home loan arrears and default levels improved in all states, localities still doing it tough included Sydney’s south-western suburbs, the NSW Central Coast and the Gold Coast in Queensland.

The south-west of Western Australia was likewise still among the regions with higher delinquencies, and tourism destinations in coastal locations were increasingly in arrears.

Australian Home Loan arrears that are greater-than-30 days  remained stable at 1.69 per cent in July 2011.

According to a report published by Standard & Poor’s Ratings Services, non conforming home loan arrears including bad credit home loan arrears increased by 52 basis points to 12.18 per cent, with $1.63 billion in subprime RMBS outstanding, which is down by around $282 million in July compared to June 2011.

It seems that borrowers who are self employed are most significantly exposed to the risk or arrears on their loans.
Clearly the current economic conditions in Australia have a lot to do with cash flow problems experienced by the self employed borrowers. Many business owners are struggling and are having difficulties meeting all their repayment obligations.

Debt Consolidation options for borrowers with impaired credit history can appear to be limited. Certainly any application made to a bank for a personal loan to consolidate debts would be declined. Unsecured personal loans generally require borrowers to have a clean credit history as do credit card applications.

Borrowers with a history of bad credit but with equity in property may wish to consolidate unsecured debts into their mortgage. In doing so you may find that your monthly repayments are reduced significantly. Naturally to qualify for a mortgage refinance at an increased amount you must be able to demonstrate loan affordability.

If you are not a home owner but own a motor vehicle outright or perhaps a boat or a motorbike, you could use the equity in these assets to apply for a secured personal loan for debt consolidation. Value of your asset must exceed the amount that you wish to borrow.

If you have some history of bad credit, have no assets and are looking to consolidate unsecured debts – you may also wish to consider a debt agreement. To qualify for a debt agreement you must have at least $8,000 in unsecured debts (this can not include your home loan or car loans). If you have previously had a part 9 agreement or were previously bankrupt you will not qualify.

Many borrowers do not realize that irregular payments on their home loans can give them bad credit history.

Sometimes paying your home loan 1 day late because your loan repayment was set up to occur one day before your salary, can result in home loan providers declining your refinance application. Even if your home loan is in order, you are simply making payments a day or two late every month, will make it difficult if you apply for debt consolidation or a car loan with your mortgage provider.

Bad credit history will prevent borrowers from accessing unsecured loans and may create difficulties when going for a mortgage refinance.

““As a result of the GFC, all lenders considerably tightened up their lending criteria with a much greater emphasis on the credit worthiness of applicants. In this environment, you really can’t have a clean enough credit history for the lenders and any suggestion that a person can’t meet their debt repayments on time is a red flag,” he commented.

The problem is even more serious if you wish to borrow more than 80% of your home value and need to obtain mortgage insurer approval.

Mortgage insurers won’t even consider an applicant with any sign of home loan arrears.

CREDIT reporting agency Veda Advantage has urged the Australian government to move quickly to update credit reporting laws, claiming the threat of a second economic downturn is causing uncertainty in the finance sector.

A Senate committee gave its support to the government’s draft plan to upgrade Australia’s credit reporting legislation and processes, prompting Veda adviser Matthew Strassberg to ask for a quick turnaround.

“Two years ago, the Minister for Privacy Brendan O’Connor announced a timetable to ensure passage of credit reporting reforms by mid-2012. We support that timetable,” he said said in a statement.

In view of the growing uncertainty on financial markets and the possibility of another global recession this legislation needs to be given priority.

Mr Strassberg said there were a number of gaps in today’s credit reports that have to be addressed as a matter of urgency. One such gap is the lack on info on the report as to the borrowers true credit limit on all their credit facilities and loans such a personal loans, home loans, car loans and credit cards.

Allowing credit agencies to obtain that type of information could only benefit consumers, he said, because companies would then have a clearer idea of the customer’s financial standing and their ability to pay their debts.

It was a view backed up by the Senate’s Finance and Public Administration Legislation Committee, which handed in its report on the government’s credit reporting draft today.

It would also change the regime from negative, where agencies mostly accessed bad information such as defaults, to positive.

This would offer a more comprehensive picture of the credit position of a borrower.

Now and again we feel frustrated at the lack of financial education provided in our schools. On a daily basis we receive dozens of inquiries from people who would like to purchase a home but do not have a deposit. There may be a minor credit issue in the past or even a discharged bankruptcy.

People are almost offended when we com back with an explanation that due to their credit default they will need to have a deposit of at least 10% and in some cases even 20%. We get to hear…”what..$80,000 deposit…this will never happen. Well the deposit requirements are simply the lender’s way of insuring their loan against mortgage arrears or defaults. The lender must be secure in the knowledge that if you default again they have sufficient equity in your home to sell it and cover their costs. Is it really so unreasonable? We think not.

No it is not possible to consolidate your debts into a home loan if you are relying on the first home owner grant for your deposit. The days of the grant being sufficient as a deposit are long gone. How can any responsible lender offer you a loan of $400,000 to buy your home and another $30,000 on top to consolidate your debts if all the home you are buying is worth is $400,000? If you have paid defaults on your credit report and you wish to purchase a home for $400,000, you can count at best on a loan of $360,000 and possibly only $320,000 – the difference needs to come from you.

Under the recently introduced National Credit Code all lenders must hold a credit license as do all brokers. It would constitute irresponsible lending in the eyes of ASIC is someone offered you a home loan without a deposit when your credit history is far from clean.

Protect your credit history and then you too will be able to qualify for the cheap home loans offered by mainstream lenders with low deposits. Bad Credit Home Loans by their nature are more expensive and do require  deposit.

Changes to lending rules which followed the GFC and the introduction of the National Credit Code , in conjunction with Tax Office crackdowns on small businesses have caused a 6 per cent increase in the number of Australian companies going under.

Australian Securities and Investments Commission insolvency figures, released yesterday show 9829 companies entered external administration in the 2010-11 financial year, the highest figure since the peak of 10,005 during the global financial crisis.

Businesses who are experiencing tough retail conditions are not finding an understanding ear with the banks, who are making it far more difficult for borrowers to qualify for loans even where the borrower has plenty of equity in their home.

The leader of ASIC’s insolvency team, Adrian Brown, said banks in an effort to  prevent client bankruptcies have gone some way to meet stable clients, in some cases allowing facilities to be rolled over without the provision of further financials.

In addition to borrowing from banks, Australian companies are exposed to US credit conditions through their heavy reliance on North America’s private placement market, the source of a third of the Australian corporate sector debt raised last year.

About $6 billion of the $21 billion in Australian corporate debt that needs to be refinanced next year is sourced from the US private placement market, with $7.2 billion coming from banks, according to research released by Moody’s in March.

While large corporates are able to issue bonds and borrow offshore, the smaller companies that make up the bulk of insolvencies depend on bank finance. The Australian government has introduced tough lending regulations which has meant that much of the low doc home loan business acceptable in the past would be declined today. It is not unusual for small business owners to resort to using the equity in their homes to finance their business debts – however today such financial solutions are more difficult to implement and are more costly than in the past.

Smaller businesses were finding it more difficult to borrow. ”For example, you continue to see not as much finance available for property development, particularly suburban-type property development, while for more blue-chip properties you’ll see there’ll be market finance available.

Ferrier Hodgson partner Morgan Kelly said small to medium businesses were having difficulty borrowing and had also been hit by changes in workplace laws, the threat of a carbon tax and the ATO’s crackdown.

He said banks were also concerned about concentrations of risk in specific areas, such as commercial property.

In theory banks want to lend money – unfortunately the people they are prepared to lend to – do not need to borrow.