Australian Insurance, Finance, Superanuation & Investment Resources

Income Insurance Calculator

Gross Income: How much cover
can I buy?

Need help finding the best home loan?

Get a free home loan eligibility assessment and compare loan offers.
Loan Amount:$ State: Postcode:

Getting a home loan with bad credit

How to get a home loan with bad credit

bad credit home loans
It is true that a foreclosure, default judgements or bankrupty on your credit file can cause you problems obtaining credit for well into the future - but that doesn't necessarily make it impossible to get a home loan.

Financial institutions typically view an applicant with a bad credit history as too high risk for lending.

But despite our historical financial failings or miscalculations, some financiers including sub-prime lenders understand that a borrower's capacity to repay a loan isn't always determined by what may have happened in the past.

Prime lenders (e.g. banks, building societies and credit unions) provide loans for people who have reasonable to excellent credit histories because they represent a low risk of default.

Sub-prime lenders can cater for those who fall outside the prime category, including those with defaults, repossessions or  bankruptcies on record.

Financiers often classify sub-prime borrowers on a scale of 1 (best) to 4 (worst).

Sub prime borrowers with a rating of 3 or 4 are those that the lender expects to be a higher likelihood of default that rating 1 or 2.

There are lenders in the sub-prime market that will provide finance to those with a 3 or 4 rating.

You still need to disclose everything about your financial position and credit history when you apply to a sub-prime lender. This information is important to the lender in understanding the best way to structure your mortgage to minimise future difficulties.

If your employment is relatively secure, your wage is healthy and you can demonstrate that you are meeting current commitments on time, it's possible that you could qualify for lower interest compared with an applicant who is not making reasonable steps to rectify their situation.

A sub prime loan will generally be more expensive than a prime loan because the lender will need to earn a higher margin to cover the increased overall risk that they are taking.

Sub-prime lending is a competitive business, so don't be talked into the first offer you come across if it looks too expensive or too restrictive. There may be other lenders equally able to assist you without charging unreasonable interest rates or other fees.

In fact, most sub-prime borrowers (including those with a rating of 3 or 4) should be able to find enough alternatives to have the lenders compete for their business. 

Why should your past financial problems determine what happens now? Owning a home may still be well within your reach.

Begin your free home loan eligibility assessment here

Related Articles

Managing Credit Card Debt

If you are having trouble keeping your credit card debt under control, you may be interested in these tips that are designed to help you stay clear of bigger debt problems. read more

Business Loans: Managing interest rate risks

Here are thoughts for business wanting to enjoy the security of prevailing low interest rates without the need to commit too long term. read more

Finance: Default and repossession

Repossession as a result of overdue loan instalments is commonly understood - but you may not be aware of these other breaches that could lead to your lender taking action to recover the security that... read more

Home Loans: Finding the one that fits

Finding the best home loan to suit your specific requirements and circumstances can be like finding a needle in a haystack. But, with a bit of guidance you just might find a mortgage loan that's a perfect... read more

Home Loans: Non-confirming loans

Non-conforming loans aim to meet the needs of borrowers seeking an alternative to the strict qualification guidelines typically imposed by banks, building societies, credit unsions, etc. The lending market... read more

... more articles

Recent News

Timely help for Australians in crisis

Finance News: 29 Jan 2013. Whilst many people around the country are in the process of rebuilding their properties and their lives in the wake of natural disasters, Financial Services Online is pleased... read more

Small loans for Australian small business

Finance News: 27 Apr 2013. Aussie small business, including start-up businesses can now access small loan finance for amounts up to $10,000 with minimal asset backing and regardless of credit history. read more

... more news

  • You can reach us by mail at
  • PO BOX 1183
  • QLD
  • 4221
  • or CLICK HERE for our contact form
financial services online
Important: Financial Services Online is a referral service. We provide general information only and we do not offer financial advice. We refer all insurance, finance and other enquiries that are initialted on this and our associated websites to specialist advisers who are licensed in their respective fields. You should always seek professional advice before making important financial decisions.