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

Providers of Credit Cards are charging very high interest rates in many cases several times the cash rate set by the RBA.

The financial comparison website RateCity has calculated that credit card providers are probably earning  $6 billion a year from credit card transaction interest rates alone.

It has also highlighted that credit card interest rates have generally remained unchanged or have risen since October 2011.

This is despite two consecutively monthly cuts to the cash rate by the Reserve Bank of Australia, in November and December.

Majority of credit card providers had not altered their rates since October last year, before the cash rate fell from 4.75 per cent to 4.25 per cent in two consecutive rate cuts,” Rate City said.

Only four cards passed on the cumulative rate cuts of 50 basis points, while nine increased their purchase rates by up to 100 basis points (one percentage point), RateCity said in a statement.

Many people already experiencing debt problems are making matters worse by selecting very expensive credit cards to use.

While credit cards have a much higher risk of default and the rates offered on this should be higher than secured loans, there is no logic in credit card rates not following the overall movement of the market.

The average purchase rate across over 200 personal cards in the RateCity database was 17.16 per cent.

Bad Credit Home Loans just like all home loans require the borrower to have some deposit and be able to demonstrate that they can afford the home loan they are applying for. However there are a few differences between a regular home loan and a bad credit home loan.

Unpaid defaults are must be repaid

While there are a number of funders and lenders in Australia who will be able to offer home loans to bad credit borrowers – they will not generally do so to borrowers with unpaid defaults. The defaults will need to be repaid before your home loan can settle. That is even the case if you have a dispute with a credit provider. To qualify for a home loan you will need to firstly pay out the disputed amount and then continue legal action/dispute until resolution.

Borrower must be discharged from bankruptcy or a part 9 agreement

If you have not been discharged from bankruptcy or part 9, irrespective of your income or deposit you will not qualify for a home loan.

Borrower must have a significant deposit

Borrowers with some history of bad credit need to have a more significant deposit than borrowers with a clean credit history. This is because lenders believe that their home loan stands a higher chance of going bad, and require additional protection in a way of a deposit of at least 20%. Depending on post code you wish to purchase in and your ability to demonstrate income, the required deposit may be higher than 20%. Borrowers who have paid out their defaults and believe that they can qualify for a first home buyers home loan with only the FHOG are misinformed – a sizable deposit is needed.

Expect rates and fees to be higher than the bank

Bad Credit Home Loans do come with interest rates and fees that are higher than is quoted by your local bank – that is because they offer loans to borrowers that are seen as too high risk by mainstream lemders.

Home Loan arrears underlying Australian prime residential mortgage-backed securities had seen a slight increase during the month of October 2011, according to the latest report by Standard & Poor’s Ratings Services .

It seems that arrears on prime home loans had gone up by 4 basis points to 1.56 per cent.

Whereas sub-prime home loan arrears went up by 36 basis points to 10.74 per cent in October.

Arrears on new sub-prime home loans increased by 78 basis points whereas more significant arrears fell away by 41 basis points.

These results were in line with expectations.

Many borrowers were exposed during the month of October to loss of employment. Others would have found that the value of their property has declined and it is now difficult to access any equity that they may have in their home to consolidate their debts.

It seems that many home loan lenders are failing to give proper consideration to financial hardship applications received from borrowers. The Credit Ombudsman Service, which released its 2011 annual report recently, has identified this as the biggest issue it faced with complaints lodged against lenders last year.

COSL reports that 34 per cent of all complaints it received during the 2010/11 financial year related to financial difficulties, specifically where a lender would not agree to renegotiate home loan repayments for borrowers facing financial hardship.

COSL chief executive Raj Venga said: “In about 72 per cent of those cases the borrower had been served with a home loan  default notice or the lender had commenced legal proceedings, repossessed the property or issued a notice to vacate.

Once COSL gets involved, generally a satisfactory outcome is achieved.

“This suggests that not all lenders are giving due consideration to the possibility that the borrower may be in financial hardship or that a change in the borrower’s payment obligations may be appropriate.”

Majority of complaints received from borrowers are around communication with lenders and their lack of willingness to negotiate with borrowers facing financial hardship.

COSL reprting mechanisms suggest that the underlying causes of financial hardship are generally loss or work, or a reduction in family income (in 30 per cent of cases); cost of living issues, including other debt held by borrowers with car loans, credit cards etc. (21 per cent of cases); illness (19 per cent); business failure (14 per cent); increases in the cost of loans (eight per cent), and relationship breakdown (seven per cent). Natural disaster accounted for only one per cent of the hardship cases determined by COSL.

Apart from financial hardship, systemic issued identified by the Ombudsman concerned deferred establishment fees, default listings and motor vehicle leases.

With respect to deferred establishment fees, many borrowers did not understand that a fee may be applicable to their loans and believed that the lender should waive it due to their personal circumstances.

Common complaints relating to default listings were that there were no overdue payments at the time the listing was made, the borrower was not informed about the overdue payment and that the overdue amount had been paid but the listing remained in place.

There were a number of complaints made to COSL in relation to motor vehicle leases including issues such as the quality of the vehicle, the availability of the warranty and the amount of termination fees.

Other common complaints were that the financial institution failed to follow instructions, incorrectly listed, incorrectly stated the amount of debt, applied the wrong interest rate, made mistakes regarding direct debits, provided finance that was inappropriate or behaved in a misleading way (particularly in relation to fees).

Disputes with respect to home loans were the most common reason for consumers to complain to COSL

Of complaints that were closed during the year, 17 per cent were by mutual agreement of the complainant and the financial institution, another 17 per cent were resolved in favour of the complainant, 14 per cent were not substantiated and 32 per cent were discontinued.

COSL membership increased from 12,724 to 15,535, a lift assisted by the wider reach of national consumer law.

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.

Non-banks have jumped on the rate cutting wagon after most big banks and other lenders had reduced their variable loan rates by 25 basis points.

Banks caved to pressure from the consumers and the Treasury last week when they finally announced their decision to pass on the Reserve Bank’s 25bp cut. Non-bank lenders have also done the same, making most variable home loans offered in Australia another quarter of a percent cheaper.

Liberty Financial announced it would cut 25bps off its variable home loans, taking the rate on its basic home loan to 6.49%.

Liberty Financial national sales manager John Mohnacheff said that the rate reduction is expected to benefit the deflated property market and generate more interest in non-bank home loans.

“With credit growth and consumer confidence both down, this change will create momentum and set the scene for an improved outlook in 2012,” he said.

FirstMac and Australian First Mortgage have also announced that they will pass on the full 25bp cut. AFM’s move will bring the rate on its 95% LVR full doc home loans to 6.49%.

Second tiers have also followed the Reserve Bank move, with AMP Bank and Westpac subsidiaries St. George, BankSA and Bank of Melbourne announcing 25bp cuts.

THE big four Australian banks have had their credit rating downgraded by Standard and Poors. This is likely  to dramatically reduce the chances of any rate cut announced by the RBA next week, being passed on in full to the consumers.

Standard & Poor’s, the world’s biggest ratings agency, has changed its ratings criteria in response to criticism in wake of the global financial crisis in 2008.

ANZ, Commonwealth Bank, National Australia Bank and Westpac were each cut one notch to AA-minus, the fourth-highest credit rating on S&P’s scale.

Macquarie Group was cut by two levels to BBB, the ninth-highest grade. Standard Chartered Plc’s rating was increased one level to A-plus, the fifth-highest rating.

The move is expected to add to the pressure on the nation’s top banks, with the funding costs for Australia’s banks already starting to surge. Banks will find that their cost of funding will go up.

In July, a research report from Deutsche Bank suggested Commonwealth Bank, Westpac, ANZ Bank and National Australia may need to sell about $144 billion of bonds in the 12 months ending in June 2012.

The news comes as fellow ratings agency Moody’s yesterday warned that Australia’s banking system faces “crucial challenges” over the coming year, with global investors to potentially snub the banks as funding costs climb and the world economy slows.

The ratings agency has warned that the health of the Australian finance system is likely to hinge on our level of exposure to the European Debt Crisis.

Senior vice president Patrick Winsbury said consumer deposits had been “growing at a  faster level than loans, allowing the major banks to reduce their reliance on offshore wholesale funding”.