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

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.

Mortgage arrears levels continue to show improvement as people are paying down their debts and limiting their spending.

According to the latest arrears report from Standard & Poor’s, home loans underlying Australian prime residential mortgage-backed securities (RMBS) that are greater than 30 days in arrears fell to 1.69 per cent in June 2011 from 1.81 per cent in March.

The decline in the levels of home loan arrears indicate signs of recovery.

Ms Chaplin said she expects arrears to fall even further over the coming quarter as the Reserve Bank’s 25 basis point rate cut begins to filter its way through to home owners.

“This was evident when the RBA cut the cash rate from 7.25 per cent to 3 per cent over seven months from September 2008 to April 2009.

Statistics gathered by ASIC seem to suggest that 2011 has not been a good year for Australian businesses with more businesses going bust than seen over the past 3-4 years.

Many business bankruptcies were caused by excessive and out of control bad debts.  There has been a significant surge in the number of Australian companies in administration during the third quarter,  to levels last seen during the 2008 financial crisis, according to figures released by the securities regulator today.

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.

More and more home owners are caving in under the pressure of home loan costs, choosing to sell the family home and go out to renting to ease financial stress.

A new study shows that between 2001 and 2009, 20% of home owners in Australia had decided to sell up and go renting. This is double the figures in the UK.

More than 50% of these subsequently returned to the property market, buying a cheaper property with a smaller home loan, however many others went on to apply for public housing and continued to rent.

The Royal Melbourne Institute of Technology survey was based on the housing histories of thousands of Australians over nine years.

It found that former owners who did not return quickly to the property market were more likely to enter public housing or qualify for Commonwealth rent assistance than long-term renters.

It seems that the lack of housing affordability with escalating property prices and escalation costs of home loans are largely to blame for this trend.

During 2011, Australia has taken the unenviable title as the second most unaffordable housing market in the world.

Australia featured eight of the top 20 markets in which housing is ranked as being “severely unaffordable”, according to the 7th Annual Demographia International Housing Affordability.

The survey found that Sydney was the world’s second most unaffordable city, Melbourne sixth and Adelaide 18th.

The remaining capitals all feature in the top 50 with median house prices more than six times the average salary compared to the accepted international standard of three times annual income.

Furthermore Australia has suffered from a very high increase in mortgage defaults in recent months.

Investment services firm Moody’s said the rate of mortgage holders nationwide failing to meet their repayments rose from 1.36 per cent to 1.67 per cent between March and June.

Meanwhile, the number of homeowners facing mortgage stress jumped to 25 per cent last month from 21 per cent in June, mortgage insurance provider Genworth Financial said in its monthly Homebuyer Confidence Index.

Rental vacancies have declined to 1.8 per cent from 1.9 per cent, it reported.

New research by Loan Market Group is pinpointing Generation Y as being the best savers amongst us all.

According to a survey by Loan Market Group, 69 per cent of respondents had become determined savers and more concerned about taking on further debt since the GFC. Many have looked at debt consolidation options and paying down their home loans, car loans etc.

The Loan Market poll which asked “Did the GFC fundamentally change your approach to finances?” found Gen Y respondents were the most savings conscious, with 44 per cent saying they were now focused on creating a savings buffer.

The online survey found 42 per cent of the 498 respondents said they had been creating a savings buffer since the GFC, while 27 per cent said they had been conscious about taking on more debt.

Ten per cent said they were now more risk averse as a consequence of the GFC.

These results are not really surprising given that many Generation Ys are only starting out to live on their own and are learning to cope with managing family finances such as home loans or rental payments.  Many are having issues with credit card balances and are looking to consolidate these and pay them down as soon as possible. Overall the Gen Ys have really understood the need to save in these uncertain economic times.

Credit Repair is the process of cleaning up your credit history as reflected on your credit report. While Credit repair may be an attractive option to anyone unable to qualify for a loan with a bank, to qualify for this service you must believe that your bad credit mark was placed in error or for some reason you should not have it on your report.

Borrowers with a history of bad credit as a result of bankruptcy, part 9 debt agreement, property repossession, etc. – ie borrowers who acknowledge that the bad credit was due to some even in their life and the report truly reflects this – will not be able to clean their credit history simply by making a request to do so.

Credit repair is only possible where for some reason the applicant believes that the bad credit is:

- a case of mistaken identity;

- the bill was already paid at the time that the default was lodged and it was lodged in error;

- applicant was never notified that the bill was due, etc.

Credit repair is not an option where you acknowledge the debt and believe that it was placed on the report correctly but would simply like to have the default removed.