Home Loan Variable: 5.94% (5.95%*) • Home Loan Fixed: 5.79% (6.39%*) • Fixed: 5.79% (6.39%*) • Variable: 5.94% (5.95%*) • Investment IO: 6.14% (6.58%*) • Investment PI: 5.99% (6.61%*)
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Life can at times take you through an unexpected series of events that may lead to you finding yourself in a bad credit situation, be it bankruptcy, a default, Part IX, Part X, court judgment against you or other negative entries on your credit history. This can lead to people making assumptions as to whether they could even possibly qualify for a loan.
Bad credit loan products are specifically for people who find themselves in this type of situation.
Interest Rate
The interest rates on these type of loans are higher as from the lender’s perspective you are viewed as posing a greater risk. The higher the risk the lender considers you situation, the higher the interest rate.
It probably wouldn’t come as a surprise to most that lenders view people with a bad credit history as a higher risk and hence why it can difficult to obtain a standard loan product. It is because of this perceived higher risk that you will find the interest rate on these type of loans are higher. If you are purchasing a home then the amount of your deposit can also affect the interest.
Home Loan Deposit
Depending on the lender and your particular circumstances, you would be expected to have at least a 20% deposit which equates to a 80% LVR for a bad credit home loan. There are some which expect at least a 25% deposit for a home loan. Again, this all comes back to the circumstances, size and cause of the bad credit history. It should be noted though, there are lenders which will consider loans up to 95% for purchasing a home or up to 90% for a refinance.
It is important to realise that deposits of less than 20% on a home loan, could and will most likely lead to a higher rate of interest on the loan and you could end up also needing to pay an additional risk free which is a one-off extra fee or Lenders Mortgage Insurance (LMI).
Documentation
Both Full doc and low doc options exist for bad credit home loans with the documentation requirements being than that which is usually required for these type of loans.
In addition to the usual documentation, there may be many additional pieces of documentation required especially around obtaining a very clear picture on your current financial situation and the circumstances and cause surrounding the bad credit.
Review of your circumstances
It doesn’t take long to see it’s a very windy road to potentially obtaining a bad credit loan.
Having you specific situation and credit history professionally reviewed will help with
- Finding the lender/s that are most open to providing you with an appropriate loan
- Investigating possible options and strategies to minimise the interest rate
- Creating a roadmap to getting the loan refinanced with a prime lender at a lower interest rate in the future
RELATED FAQS:
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The comparison rate is calculated on a secured loan of $150,000 with a term of 25 years with monthly principal and interest payments. WARNING: This comparison rate is true only for examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Important Information: Applications are subject to credit approval. Full terms and conditions will be included in our loan offer. Fees and charges are payable. Interest rates are subject to change. Offer does not apply to internal refinances and is not transferable between loans. As this advice has been prepared without considering your objectives, financial situation or needs, you should consider its appropriateness to your circumstances before acting on the advice.
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