So, what is happening to bad credit lenders?
That’s the question of a lot of people have asked over the past few months and rightly so. More and more people are facing difficulties in meeting repayments on their home loans and are seeking information as to what type of home loan lender will be able to help them.
Traditionally, bad credit lenders have filled a gap in the market where traditional banks and lenders cannot cater for anybody suffering mortgage stress. Today, in the tight credit conditions which dominate the financial sphere, there are only one or two “lenders of last resort” as they have come to be called.
Many of these lenders have disappeared from the scene, but recently there are some emerging signs that this lending market is again on the move. For example, one or two lenders are prepared to lend up to 90% LVR even for people with a bad credit history ie those with credit defaults and judgements. They may even go one step further and offer some low Doc products for this type of borrower but there are some conditions attached.
Applicants for these types of loans must have been in steady employment for at least 12 months or, if they are self-employed, must have a registered ABN of at least six months duration. But these loans fall into the category of’ “rate for risk” meaning that the higher the loan to value ratio and the shorter the period over which the ABN has been registered, the greater the risk and, therefore, the higher the interest rate.
The interest rate is also determined by the severity of the credit impairment. So, although the conditions are stringent and the interest rates are comparatively high, the fact that some of these bad credit lenders are back in the market is a good sign for the future.
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