5 bad credit myths broken


Not everyone has a perfect credit history, but that shouldn’t stop you from applying for a home loan.

There are a number of myths circulating about bad credit, so if you are interested in applying for a home loan, it is important that you understand the facts. Take a look at the top five myths about bad credit loans outlined below.

I will not be able to get a home loan because I have a bad credit report

Since the Global Financial Crisis (GFC), many people with bad credit have been reluctant to apply for a home loan because they have been told that these types of loans no longer exist. However, this is definitely not the case. There are a range of lenders with home loans specially designed for borrowers who have bad credit history.

Do your research online and be sure to talk to a lender or broker who has experience with this type of loan as well as a range of loan options.

Home loans for bad credit are only for people in default

While bad credit home loans can help people with default or past bankruptcy, they also provide a great opportunity to protect your credit report. If you’re in financial trouble and your home loan and credit cards have gotten out of hand, you run the risk of a lender defaulting on your credit report. Once you’ve listed the defaults, it may affect your ability to get financing for up to 7 years. Acting quickly can prevent the situation from worsening and the list of faults.

Consolidating your debts into your home loan can get you back to a one-time, affordable repayment. The interest rate may be higher, but the overall repayment may be less than what you paid on multiple debts. Once your situation is resolved and you have shown a good 6 to 12 month track record, you can usually look to refinance a standard home loan at a great rate.

I’ll be stuck on a higher rate home loan for 30 years

Generally speaking, bad credit home loans are more of a shorter-term solution for you to buy your own home or consolidate your debt to help you pay it off faster. Once the defaults on your credit report expire, if you can show a good history of your loan, you can often refinance a standard loan at a lower interest rate.

All faults are treated the same

Many borrowers get caught believing that lenders will treat all defaults the same, regardless of their size, but this is not true. For example, if a default is less than $ 2,000, lenders may be more forgiving of a default that is several thousand dollars higher.

How a lender assesses your defaults will also depend on when they were created. If you have one or more very recent defaults, it will be more difficult to get a loan than to have an older default. This is because lenders need to have an accurate picture of your current financial situation and if you have defaults that are only a few months old it makes it look like you may not be in control. of your finances.

Paid and unpaid defaults are also treated very differently. Payment defaults are extremely bad on your credit report because it looks like you’ve ignored it completely. However, a paid default shows that you did your best to resolve the issue and that you took responsibility. As a result, lenders may view your request more favorably.

Lenders are not interested in my story

You might just think that lenders will care about the ‘what’, not the ‘why’, but they are not. For most lenders, the story behind your credit problems is very important. Life events such as marriage breakdown, inability to work due to illness, loss of your job, failure of a business venture, helping a sick relative or needing help. Costly surgery will all have a significant impact on your life, and therefore often on your credit history.

It is very important that you let your lender know in detail how your credit problems arose. They seek to see that the situation is unique and that your current situation is such that it is unlikely to happen again.

Probably the most important thing to do is talk to an expert and get the right advice. State Custodians has a team of very experienced loan specialists who are experts in bad credit home loans. In addition to having a range of their own loans that suit various circumstances, they also have access to loans from a panel of lenders who will consider lending to people with credit history issues. Our loan specialists will talk to you about your situation and what you are looking to do, then can advise you on your options.

Not everyone has a perfect credit history, but that shouldn’t stop you from applying for a home loan.

Anouska Linz is Head of Online Sales at State Custodians and has over 10 years of financial services experience in both brokerage and banking. With a bachelor’s degree in accounting, Anouska quickly discovered a passion for mortgages and helping people achieve their homeownership goals. She leads a team of highly experienced loan specialists who are passionate about finding loan solutions that translate into real gains for the client. She is also a huge netball fan.

For more information on our home loans, visit www.statecustodians.com.au or call 13 72 62.

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