How To Compare The Various Home Loans on the Market For Bad Credit
When comparing home loans, if a bad credit score is present, a borrower might find it difficult to pursue a regular mortgage application. In some cases they might be considered; especially if they are willing to pay a much larger sum to act as their deposit, or if they have a guarantor that’s in a position to cover any failed repayments. Generally speaking though, it might be worth pursuing a dedicated home loan for bad credit from the offset or at least looking for a fixed home loan rate so you know what your future liabilities are.
Second chance home loans
There will typically be just a handful of reasons that a potential mortgage applicant will need to pursue an alternative home loan. If they have checked their own credit score and have been advised that their likelihood of approval is minimal, then it might not even be worth approaching a bank for a regular mortgage.
Likewise if they have already applied for a home loan and have suffered a rejection; this could have marred their potential to re-apply to the same bank – or any bank for that matter.
When issuing a rejection, many banks within Australia will place a strike against the applicant’s name, as well as accompanying information as to the reason for their rejection. If the cause relates to their ability to meet repayments then the applicant might not be in a position to have their next application considered by a lender.
And this is where second chance home loans can come in handy. They are ideally suited for those that have applied for a mortgage and have suffered a rejection; but they can also be suitable for individuals that previously possessed a low credit score that went on to improve their rating.
It can also be possible to dedicate a particular amount of time to improving a credit score – such as spending 6 months repaying a credit card debt entirely to improve ratings – and although a bank might not be impressed by the temporary enhancement; those that offer second chance loans should be.
These loans will often rely on assets to act as collateral to secure the sum being borrowed – and when paired with options solutions such as turning to a guarantor or providing more money to act as a deposit; the likelihood of being approved can be far more substantial, no matter how bad the applicant’s credit history might be.
Author Felicity Heffernan