Due to the relatively recent global financials and the Australian Royal Commission into banking practices, many of the major banks have become risk averse. When a bank lends money to someone, it is always an assessed risk. They want to ensure that the loan itself is serviceable by the loan entity and that they will actually make money off of the loan. In many ways, home loans are their bread and butter in terms of profit making.
The Problem with Banks
The biggest problem with big banks is that they have a lot to lose. They have traditionally always been quite risk averse, but this has amplified since recent financial struggles, official investigations into lending practices, and bad news stories.
The impact of this is that half of all home loan applications in Australia are knocked back by the big banks. Where once they were willing to lend money, even low loan amounts are now being scrutinised ferociously as they seek to mitigate their risk and lower their exposure to risk conditions.
What Can You Do About it?
The good news is that there are still options if you’re serious about entering the home market and finding a financial institution that will lend money to you. Even if the banks have said “no,” some lenders, such as http://www.universalfinance-difficultloanspecialistsadelaide.com.au/, will consider difficult finance.
Lenders like this specialise in considering applications from people who may have a poor credit history, and those who do not fit the strict criteria for lending that the major banks demand. This makes them a good alternative when you need a home loan or many other kinds of loans.
Dealing with Bad Credit
One of the biggest issues that many people face is that society is full of credit traps. Banks hand out credit cards easily and then place a black mark next to your name when you fail to make one single payment for the rent. In their eyes, you may be a credit risk and they will knock back your application for a mortgage.
When the big banks are currently refusing to lend to nearly half of all people who apply, it’s essential for alternative lenders like this to pick up the slack and create other options. This is also where private investors can really help.
Though such financial institutions have ties with all of the major banks, credit unions, and traditional lenders, they also maintain links with private investors. These private investors are often willing to assess the prospect of lending money to those who have financial arrears, those who have poor credit, and those who don’t meet the strict criteria of the banks for extending finance.
In an age where bad credit can follow a person for many years, it’s good to know that there are alternatives when it comes to getting personal loans and house loans.