Wasn’t it great in those years not too far gone, when budding homeowners could get their hands on a home loan without the prying look into their credit history? All they had to do for a no credit home loan was put their new home up as collateral against the loan and wait until it was repaid to get the official ownership papers from the loan provider ‘ wait, was that great?
If you ask us, having your credit history evaluated by home loan providers really isn’t a horrible thing, even if the process is a bit of a hassle. While credit checks do provide some security to lenders themselves, ultimately they are there to protect the recipient, that’s you!
A lot of people still ask about no credit home loans and not many know that they technically don’t exist anymore. To sort through some of the confusion, here is what happened to no credit home loans.
Pre 2010 home loans
Have you heard of the UCCC? Look, we’re not too surprised, we know that it’s virtually impossible to stay up to date with what’s happening in home loan regulation and it’s also not that exhilarating when you just want to get into a home of your own.
Here are the bare essentials.
Prior to 2010, credit lending in Australia was controlled by the UCCC (Uniform Consumer Credit Code) which was done on an individual state and territory basis. The UCCC, while including the term ?uniform? really wasn’t all that uniform, as there were additional codes and regulations that some states had to abide by while others didn’t.
The UCCC was also a little bit behind the times, not taking into account credit or home loans given for investment property purposes and the UCCC also lacked a number of provisions in terms of considering the financial hardships of borrowers.
And so the act was amended.
Post 2010 home loans
In order to provide greater protection to people who were borrowing money on credit, the NCCP (National Consumer Credit Protection) was created, which also effectively abolished no credit home loans across Australia. The roll out of this act also saw responsibility transferred from states and territories to the Commonwealth so that uniform regulations were actioned.
Again we’ll skip the boring stuff, which really just includes more acronyms and go straight to the crux of this updated act.
The 3 main components that distinguish the NCCP from the outdated UCCC are:
The NCCP rolled out a broad and all-encompassing licensing regime for all loan and credit providers in Australia, from banks to brokers and any intermediaries in between. For credit providers to engage in business activities, they were required to have a credit license and also to abide by the below.
As the core of no credit home loans was that financial lenders had no real idea about the ability of borrowers to repay their loans or whether they had any financial hardships, responsible lending requirements were established. The new responsible lending requirements essentially ensure that loan providers cannot provide credit that is unsuitable to people who cannot meet the repayment requirements.
Depending on the amount you owe your lender, homeowners many now be eligible to change the prepayment terms due to job loss, injury or other circumstances that can impact your ability to make your loan repayments. A provision that did not exists with no credit home loans.
The NCCP also brought with it provisions for borrowers/ consumer protection so that in the case of any misconduct on the part of home loan lenders was experienced, borrowers could seek a resolution. Borrowers can also take up repayment issues with the Court system if they feel like they are being treated unjustly by their home loan lenders.
The new no credit home loans
The nature of today’s economy means that many people have and are experiencing financial issues across the country and while no credit home loans don’t exist anymore, the changing economy has encouraged financial lenders to offer new home loan schemes that take consumer protection into account. Enter ?bad credit home loans’.
Now that we know it’s impossible (aka illegal) for home loan lenders to not look at your credit report, bad credit home loans make it possible for people with credit issues to still get into homes of their own.
In conjunction with the responsible lending requirements outlined in step 2 (look up), lenders that offer bad credit home loans will take a good look into your credit report firstly to identify your score and secondly, to find out why you may have bad credit. Bad credit lenders will also look at the steps you have taken to rectify credit issues you have experienced in the past and use all of this information to determine whether you are eligible for a home loan.
While you may see getting ahead of a bad credit rating as a huge hassle, it really doesn’t have to be and that’s where we can help here at No Savings. Our network of financial experts can provide advice regarding bad credit home loans and other finance options applicable to Western Australia, that could see you get into a home of your own even with credit issues. Contact us today and see how we can help.