Best 5 Australian Lenders For Bad Credit

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Last Updated: 19th March, 2024

Bad Credit Home Loans: Compare Top Lenders

Having a bad credit score doesn’t mean you can’t buy a home, but you’ll probably have to look a little harder to find a lender that can meet your needs.

This is where Home Loan Experts can help. We have lenders on our panel known for considering borrowers despite a bad credit rating. Let’s take a closer look at some of the best.

Top 5 Lenders Specialising In Bad Credit Home Loans

Home Loan Experts’ list of the best bad credit home loan lenders takes into account flexibility of eligibility requirements, interest rates, terms and loan features. Based on these criteria, these are the top five lenders in Australia for bad credit, as judged by our specialist lenders and in no particular order:

1. Pepper Money

Overview

Pepper Money pays special attention to borrowers with a bad credit history or to those who cannot prove their income. Their efficient service and fair pricing enables borrowers to buy a home or refinance their current home loan even after they’ve been declined by several other lenders.

Pros

Beating the other specialist lenders on interest rates and fees
Special solutions for borrowers with bad credit history
Fast loan approvals

Cons

Higher interest rates than the major banks
They’re less likely to help with remote or large properties
Fixed rates unavailable

Home Loan Experts Rating: 5/5

2. Resimac

Overview

Resimac is popular for dealing with bad credit home loans and having unique lending policies. Resimac Specialist is a loan product for borrowers with impaired credit. This loan product doesn’t have a limit on the number of debts that can be consolidated.

Pros

No credit scoring
Interest rate is based on security and not the purpose of the loan
Solutions for borrowers with a bad credit history

Cons

Relatively strict lending policy
Interest rates and fees are not always competitive
Slow to assess your application during busy periods

Home Loan Experts Rating: 3.5/5

3. Bluestone Mortgages

Overview

Bluestone’s Specialist + loan is crafted for borrowers who have had credit issues, such as bankruptcy and other defaults.

Under this loan type, they categorise a borrower’s credit history namely Clear, AAA, AA, A or BBB depending on the number of defaults, recently missed mortgage payments and if they have a history of bankruptcy or part 9 agreements.

A borrower that is categorised as Clear (highest category) will get a better interest rate than one categorised as BBB (lowest category). Being in a lower category also means a borrower will need a larger deposit.

Pros

Assessing loans using common sense instead of credit scoring
Special solutions for borrowers with a bad credit history
Accepts most unusual income types at 100%, but bonus income is shaded

Cons

Much higher rates and fees than a major bank
LVR restrictions for non-metro locations
Won’t do land and construction loans

Home Loan Experts Rating: 4/5

4. La Trobe Financial

Overview

Specialising in home loans for borrowers with a bad credit history, La Trobe’s bad credit commercial loans and low-doc commercial loans often have high rates but provide borrowers with options that often aren’t available from other lenders.

Pros

Specially curated solutions for borrowers with bad credit history
Decent cashout policy
Assessing loans using common sense instead of credit scoring

Cons

Maximum LVR is 80% of the property value
Risk fee, similar to Lenders Mortgage Insurance, can be expensive
Interest rates and fees are not always competitive compared with other specialist lenders

Home Loan Experts Rating: 4/5

5. Liberty Financial

Liberty’s specialist lending is great for borrowers looking to rectify their history of bad credit. On the other hand, as with any specialist lender, if a borrower misses payments on their home loan, Liberty will repossess the related property faster than any bank.

Pros

Home loans without genuine savings
Lenient when assessing your borrowing power
Special solutions for borrowers with a bad credit history

Cons

Among the most expensive LMI on the market
Uncertainty on loan approval
Often don’t stick with the rates promised during application

Home Loan Experts Rating: 4/5

How To Choose The Best Bad Credit Lender For Your Situation?

There’s no single ideal lender for every situation. Which one is right for you depends on a few factors:

Eligibility requirements: Lenders have their own eligibility requirements, including minimum credit scores, minimum income levels and maximum debt-to-income ratios.
Interest rates and fees: Different lenders use different criteria to calculate the interest rate for your home loan. We recommend getting quotes from a few lenders to compare interest rates, fees and prepayment penalties to figure out which will be the cheapest option for you.
Repayment terms: The repayment terms a lender offers make a huge difference. A longer repayment period will reduce your monthly bill. On the other hand, a shorter term means that you’ll be out of debt sooner and will have to pay less overall in interest.
Type of lender: Your most suitable lender could be a bank, credit union or online lender. While online lenders often have low rates, absence of in-person service might not work for you. Additionally, your existing lender may be more willing to extend you a home loan even with bad credit, based on your existing relationship.