Bad Credit Home Loans

Bad Credit Home Loans

If you’ve tried taking out a home loan before but got rejected because of your less than stellar credit records, it is pretty understandable to have reservations in taking out another one. However, you’re not in this situation on your own. Many other Australians are in the same boat as you with more even at very high risk of defaulting on their credit obligations. However, your bad credit score should not be enough reason to prevent you from getting access to a home loan. These days, you can sign up for bad credit home loans.

At MagicLoan, we have been helping bad credit borrowers get access to bad credit home loans. As a lender finder service, we work with some of the most trusted lenders across the country to offer specialist loans to people who are credit-challenged. This doesn’t mean that our lender partners are not going to carry out credit checks anymore. They will still do. However, they will make a decision not only on your credit records but in your capacity to afford the loan you are taking out. This is why bad credit borrowers are more than welcome to apply. When other lenders have already said no to you, our lender partners can say yes.

Understanding bad credit home loans

Loans for bad credit borrowers refer to loans intended for borrowers with low credit scores or those with no credit records at all. These are offered by specialist lenders who tend to focus their attention on catering to the financing needs of credit-challenged borrowers. Those who have been rejected by traditional lenders and banks can refer to these loan providers and expect to be given a fair chance of loan approval. 

Bad credit home loans are also referred to as non-conforming or sub-prime loans in Australia. The same loans are also offered to people who do not have any established borrowing history. Not all people who are offered a non-conforming loan because they have bad credit. This is also offered to borrowers that are self-employed so they cannot procure the required tax returns as part of the loan requirements. Some are also offered the loan simply because they are unable to fit certain credit measurement standards. 

Lenders that offer mortgages for bad credit borrowers are different from the standard home loans that banks and other traditional lenders offer. For one, the way that specialist lenders look at loan applications differs a lot from the way other lenders assess loan applications. Instead of basing their decision solely on what your credit score says, they will instead assess the application on an individual basis. They will also consider your present circumstances and your capacity to afford the loan. For these lenders, borrowers are more than just what their credit records say.

Getting approved for bad credit home loans

If you’re worried that your credit score is going to risk your chances of getting approved for a home loan, you have the choice to wait until the negative entries on your credit history will finally lapse (which usually takes five years), work on getting your credit score up, or look for lenders that can offer bad credit home loans. It is common for negative credit behaviour and defaults to stay on your credit records for five years. Beyond that, they will be removed. Lenders are more likely to look at your application more favourably when they can see that defaults have been resolved or paid.

If you think that referring to a lender offering bad credit home loans makes the most sense for you, you’ll find that the process involved is pretty much the same as the steps you would usually take if you are applying for a loan with regular lenders. You’ll be required to provide such documents as proof of income, your payslips, government-accepted IDs, bank statements and other information that the lender may deem necessary. Perhaps the biggest difference is that most of these loans are processed online so it takes less time to process, approve and fund it, with some lenders being able to complete the process within 60 minutes or so. 

Interest rates and bad credit home loans

Lenders offering loans for bad credit borrowers are taking on higher risks by dealing with borrowers who have not exhibited the most favourable borrowing behaviour in the past. There is a very high likelihood that these people they deal with will default on the loan as well. They need to find a way to offset such a risk and their way of doing so is by charging higher interest rates. Low interest rates are generally reserved for borrowers with the highest credit ratings. It is also offered to people who can make a substantial deposit or those that can offer a valuable asset to secure the borrowing. 

Getting a home loan approved

Show lenders you know how to save

It will help increase your chances of getting approved if you can show the lenders that you know how to save funds that can then be used to pay for the loan. Establishing a separate savings account with a genuine history of you contributing to the account regularly will bolster your chances as this can effectively show how committed you are to meeting your financial obligations. 

Check your credit report for inaccuracies

You are entitled to get a free copy of your credit report every three months. It is advised that you take the time to find out what your current credit score is and to check if there are any inaccurate entries so you get the chance to get in touch with the credit reporting agency to get it corrected. To do this, you will usually be required to provide proof that the details reflected on your records are not correct.

Improve your credit rating

It doesn’t hurt to take steps in rebuilding your credit score. You can start by settling your present debts and making sure that you make full credit card payments every time. You can also reduce your credit limits and close any credit lines that you do not need. If there are existing car loans or personal loans under your name, it helps to get them paid off as well prior to applying for an unsecured loan as this can contribute to a positive credit rating. 

Get the required documents ready

Most lenders will need you to provide certain documents to support your loan application. Among the most common documents you will be required to submit include payslips and bank statements for the last 3 months. This will help the lenders determine your incoming and outgoing expenses to better assess whether the loan you’re taking out is affordable enough for you. You’ll be asked to provide IDs, and proof of residence among others. Having all these documents ready ensures that you can get them submitted as soon as the lender requires them. Thereby, speeding up the loan processing.