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Here in Australia, there are types of mortgages that are offered by what’s known as specialists or non-conforming lenders, and one of them would be bad credit home loans. For this type of loan, all situations are considered – even ones where borrowers don’t have a very good credit score.


In a way, this type of loan helps what can be considered “out of the box” applications that aren’t likely to be approved by the bank.


In this post, Wealth You explains what you need to understand about bad credit home loans so you’ll know if this is a viable option for you:


Understanding Defaults


It’s important to understand that there are generally two types of defaults that lenders check:


  • Paid Defaults are defaults that you have already paid in full.
  • Unpaid Defaults are those defaults that you still haven’t paid in full.


A default is basically a record of your credit file that reflects whether or not you have an overdue account for personal loans, a credit card bill, a phone bill, or others.


When you have a default on your credit file, it’s likely that you’ll get declined by major banks as this is a red flag that tells them you are unable to pay your debts.


Types of Bad Credit Home Loans


Discharged Bankrupt Home Loan


This type of bad credit home loan is offered to those who are bankrupt and being discharged. You can find lenders that will let you borrow money to buy a property even a day after you have been discharged bankrupt. When you say “discharged” this means you are released from bankruptcy and you are no longer required to have limited assets and you can travel overseas again. It also means you can apply for credit again.


Part IX Debt Agreement


This is offered to borrowers who are in a Part IX Agreement and have completed it. In Australia, if you are unable to pay your debts, you can choose to see a debt agreement administrator who can help you come up with a debt agreement between you and the lender. As soon as that debt agreement is fulfilled, you’ll be discharged.


However, a Part IX will be on your credit file for up to seven years, which is certainly something to consider. That said, there are lenders who will still consider your application, given that you have already completed your Part IX Agreement.


Tax Debt Home Loan


This type of bad credit home loan is offered to borrowers with a huge debt with the ATO or the Australian Taxation Office. What happens is that the borrower’s ATO debt is then added to the mortgage so the borrower will be cleared from their ATO debt.


Debt Consolidation Home Loan


This particular type of bad credit is offered to borrowers with a number of small debts that have become unmanageable. In Australia, there are many people who just choose to roll different forms of unsecured debts including credit cards, personal loans, or car loans into their mortgage so they can have a simpler repayment plan.




Bad credit home loans give you a chance to still get approved for a mortgage even when you don’t have a good credit record. Depending on your particular situation, you could qualify for any of the mentioned types of bad credit loans. Of course, you are going to need more information to determine which one is best for you.


Wealthy You can discuss these bad credit home loan options for you. We are among the best mortgage lenders in Sydney and we can guide you through your loan application process. Contact our specialists today to know the best solution for you!