Bad Credit Strategies

If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!

Maybe it’s a sign of the times, but over the last few months I have been asked more and more about how people with bad credit problems can get out of their situation. The term bad credit usually pops up when people are applying for loans, and in a lot of cases the applicants don’t even know of the problem until this point. one of the most common issues to arise are underpaid telecommunication company bills. As a general rule, a lot of these companies are very quick to list a late or slow payment, even if it’s only $20 or $30. these issues are easily dealt with, and it is usually also a good explanation and no further problems arise.

The real crunch comes, when people simply cannot make the payments because they are overburdened with too much debt, and it is here that the real problems begin. There are, however, some easy ways to overcome these problems. I will be writing a detailed report over the next few weeks, which will outline the steps required to refinance existing debt into more manageable proportions. You can also check out this web site for some great assistance on Home Loans if you have credit problems.

Home Loan Help If You Have Credit Problems

For the time being, however, I would like to point you in the direction of the easiest step of all. And that is budgeting.

I know, I know, everyone knows that budgets don’t work but I’m here to tell you that they do work, they can make your life simpler, and they can take you on the path to prosperity.

I have a business partnership with a new company called Keep2Budget. The software they provide is state-of-the-art, simple to use, and makes budgeting a commonsense and easy process. you can go to the website and have a look, but please come back to me as I may be able to offer a special deal on the price of the software.

Believe me, if more people took this first step and started a budget, the words bad credit would disappear from your vocabulary.

Bad Credit Loans

Over the last few months there has been a lot of talk in the newspapers about the sub prime crisis in the United States. What does this mean?

It is quite a complex story, but the bottom line is that many lenders in Australia will be affected and rates will go up. Although most if not all lenders will be affected in some small way, it is the non-bank lenders that will feel pressure the most. RAMS has already gone to the wall and have had their brand-name purchased by Westpac. This does not mean that existing borrowers it anyway under threat, it just means that RAMS, and lenders like it, had had their funding dried up, meaning they can no longer take on new lending.

The main area of lending that I think will be affected the most falls in the category of non-performing loans, or bad credit lending. These lenders obtained most if not all of their funding from the United States sub prime market. Until now, they have been a great resource of lending to people who will fall outside the normal lending criteria of mainstream banks. They give a second chance to people with credit problems or people who have had some problems in the past and have had their applications to client by the main lenders.

We have already witnessed one of the main non-conforming lenders in Australia, Pepper Home Loans, withdraw a number of products from the market, lower their racy oaths, and increase interest rates applicable to their loans. Existing borrowers are at the stage still safe, but the future is by no means clear.

The upshot at this quite early stage of developments is that nonconforming and bad credit loans will be under the hammer and will remove one of the key options available in the market. Although it is only a small percentage of the overall lending market, it takes a lot of potentially good borrowers, including a lot of self-employed people, out of the market completely. This may reduce competition for mainstream banks, that they themselves still have small exposure to borrowing in this market, in that they do obtain some of their funding from the sub prime lending market in the United States.

This will place it in the unusual position of having to consider a rise in interest rates even if the reserve bank does not raise them officially.

Home Loan Ebook Now Available

At last I have finished the first draft of the Home Loan Ebook I have been promising. To obtain it you just need to leave a comment requesting it and I’ll email it to you.

Feel free to make any comments as to how you think it might be improved, I am always keen to hear new ideas and to hear what things you need to know.

I will be updating it as the market changes so the information remains relevant.

Give it to your friends if you like but please note the copyright conditions and do not attempt to alter it in any way. (It’s password protected anyway!)

Naturally the information is not to be construed as advice in any way, and I do not hold the information to be definitive or complete. The information is a guide, hopefully a good one, that will assist you in determining which loan is the best for you, and not everyone else!

Email me or leave a comment below.

Cheers

Michael

Bad Credit Mortgage Refinancing

In this article I will explain how bad credit mortgage refinancing works.

If you have bad credit, mortgage refinancing will be a challenge for you. In the first place, most banks will turn you away and you will have to consider alternative lenders. Fortunately, there are many lenders who specialise in lending to people with bad credit histories; but first of all, what is a bad credit history.

This is important to understand, because it will determine what percentage interest the lender will charge for a loan, and in general terms, the worse the case the higher the interest rate. Most of these lenders will categorise applicants in the following way:
• How many arrears notices have been issued by the current lender in the past six months?
• Are there any outstanding Court Judgments outstanding, i.e. unpaid? If how many?
• Are the Council Rates paid up to date?
• Have there been any Credit arrangements made which are still current?*
• What is the loan to value ratio (LVR) i.e., the loan amount expressed as a percentage of the value of the property?
• What is the employment history of the applicant?
• What is the reason for the trouble in the first place?

(*Arrangements mean PartX debt arrangements entered by the borrower under the Bankruptcy Act to pay out creditors by way of an agreed schedule.)

What the lenders are doing through his process is painting a picture of the applicant. They treat each case on its merits, and will make an offer based on their assessment.

Typically, the better the explanation and the better the chance of there not being a recurrence of the problem, the lender will lend more at a cheaper rate.

Some examples make it easier to understand.
First, take a person with a steady job and a good credit history, who loses his job following a car accident which puts him in hospital for two months. His home loan falls into arrears and he can’t make up the difference. His current lender even after giving him some time to bring the loan up to date will not give him extra time.

Second, take a person who has fallen behind on his home loan payments, takes out a credit card and uses cash advances to pay the arrears. He then obtains a car loan, but soon falls behind. There too. Then the credit card falls into arrears.

In both cases it is likely that a non conforming lender will agree to assist with a loan to refinance each borrower. The first applicant will be more likely to attract a better deal however.

I once had a client who had been in arrears with her home loan, and had also defaulted on her car loan, her two credit cards, and a personal loan she had taken from a “pay day” lender. Her salary was quite high and there was no apparent reason for her arrears. A study of her bank account statement, however, showed many cash withdrawals from ATMs at casinos, usually on a daily basis. The non conforming lender declined her application because they judged that she had a gambling problem at the root of her loan repayment problems. It was therefore likely that giving her another loan would not solve her problem.

The real point to all this is that the earlier a person addresses the problem by contacting their lender, the easier it will be. Secondly, there are financial counselling services that can also offer assistance. If you try to take control early, you will do yourself a real favour. And remember, there is usually a way out of the problem that is easier than you think.

If you have a friend in trouble, or need to discuss your own position, please ring me for a confidential discussion as soon as you can on 1300 133 193.

Next Page »