A guide to refinancing when you have bad credit or arrears

Published on November 25th, 2020
  Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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Refinancing your home loan can unlock doors to you finding a better interest rate for your home loan and helping you save in the process. But what if your situation to refinance is a bit tricky, especially when you have bad credit or arrears? This is a guide that will help you know what to do when you have bad credit or arrears and you are looking to finance.

The limitation of bad credit

When assessing your eligibility to refinance your home loan, lenders will look at your credit history. If you have bad credit it can limit your options because of the negative information that will result in a bad credit score. Having bad credit means that you have:

  • Defaulted on a loan
  • Have been declared bankrupt
  • Missed repayments
  • Failed to pay off other debt agreements

Can you get refinanced even if you have bad credit?

Fortunately, there are lenders that specialise in providing home loans to people that have bad credit. Checking to see if a lender will cover you even if you have had a discharged bankruptcy will help you get access to the right financing without being rejected too many times which can also affect your credit history.

The limitation that comes with having bad credit also means that you are likely to pay a higher rate. But this doesn’t mean that you cannot compare your options to find a home loan that comes with features and rates that are suitable towards your situation. In the end, you will be better off refinancing your home loan as this will help you save tens of thousands of dollars on your home loan and also reduce the time you will have to pay your loan off.

What do I have to do to get access to refinancing?

Before applying for a loan, it is vital that you assess the condition of your credit file and then proceed to fix any problem areas. It is possible to access your credit file for free to assess any errors or arrears that your file might have. It could also help you gauge if refinancing your loan will be a good decision.

Once you have assessed that the information in your file is accurate and that there are no errors you will be able to proceed to find ways forward on how to pay off your existing debt. Always keep in mind to assess your financial situation before taking out a loan. This will help you see if you will be able to handle a new financial obligation or will it dig you further into debt.

It is possible to discuss a payment plan with your current lenders in order to help you get back on top of repayments. Speaking to a financial advisor can also help you plan your way forward effectively to make refinancing your home loan easier to manage.

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This guide provides general information and does not consider your individual needs, finances or objectives. We do not make any recommendation or suggestion about which product is best for you based on your specific situation and we do not compare all companies in the market, or all products offered by all companies. It’s always important to consider whether professional financial, legal or taxation advice is appropriate for you before choosing or purchasing a financial product.

The content on our website is produced by experts in the field of finance and reviewed as part of our editorial guidelines. We endeavour to keep all information across our site updated with accurate information.

Approval for home loans is always subject to our lender’s terms, conditions and qualification criteria. Lenders will undertake a credit check in line with responsible lending obligations to help determine whether you’re in a position to take on the loan you’re applying for.

The interest rate, comparison rate, fees and monthly repayments will depend on factors specific to your profile, such as your financial situation, as well as others, such as the loan’s size and your chosen repayment term. Costs such as broker fees, redraw fees or early repayment fees, and cost savings such as fee waivers, aren’t included in the comparison rate but may influence the cost of the loan. Different terms, fees or other loan amounts may result in a different comparison rate.

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