Credit impairment doesn't automatically disqualify you from borrowing. Private lenders focus on equity and current situation, not just credit history.
What is "Bad Credit"?
Bad credit includes:
- Payment defaults ($150+ unpaid bills)
- Court judgments
- Bankruptcy (current or discharged)
- Part IX or X debt agreements
- Multiple late payments
- Credit inquiries (too many applications)
- High credit utilization
- Low credit score (below 600)
Why Banks Decline Bad Credit
Banks typically auto-decline if:
- Any unpaid defaults
- Bankruptcy within 3-7 years
- Court judgments
- Credit score below 650-700
- Recent late payments on loans
How Private Lenders Differ
Private lenders: ✅ Review full circumstances (not just credit score) ✅ Focus on security/equity (property value) ✅ Consider current situation (not just past) ✅ Accept explainable credit issues ✅ Offer individual assessment
What they care about:
- Property equity (50%+ available)
- Current ability to pay (income/cash flow)
- Exit strategy (how you'll repay)
- Reason for default (was it temporary?)
Bad Credit Loan Rates
Interest Rates:
- Minor issues (paid defaults): 9-13% p.a.
- Moderate issues (recent defaults): 12-16% p.a.
- Serious issues (bankruptcy): 15-20% p.a.
- Very serious (current bankruptcy): 18-25% p.a.
How Much Can You Borrow?
LVR (Loan-to-Value Ratio):
- Minor issues: 70-75% LVR
- Moderate issues: 65-70% LVR
- Serious issues: 60-65% LVR
- Severe issues: 50-60% LVR
Example: Property worth $600,000, discharged bankruptcy:
- LVR: 65%
- Max loan: $390,000
- Less existing debt: $200,000
- Available: $190,000
Repairing Credit While on Private Loan
Use the private loan as a bridge:
Year 1:
- Pay private loan on time (every payment)
- Pay all bills on time
- Reduce credit card balances
- No new credit applications
Year 2:
- Continue perfect payment history
- Credit score improving
- Approach second-tier banks
Year 3:
- Credit significantly repaired
- Apply to banks (often successful)
- Refinance to 6-8% p.a.
- Save thousands in interest
Ready to explore options despite bad credit? Connect with specialist lenders who work with credit-impaired borrowers.