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Before we start….

For further content, please visit https://www.bir.net.au/blog/

And, if you would like a Free Property Report, you can order yours here: https://www.bir.net.au/report-request. You can obtain a report for a particular property, suburb or region in Australia, so you can make informed property decisions. Plus, our suburb reports now provide a comparison report of up to 5 suburbs you want to research.

Any questions, please ring me, Michael Royal 0411 190 474 or email me: michael.royal@bir.net.au. And you can also book a meeting with me: https://calendly.com/michael-royal/chat-re-finance

Now, back to the Article! 😉

1. All borrowers’ circumstances are not the same

In today’s fluid world, nearly all borrowers have different histories of work, credit experience, income, households, expenses – and the list goes on.

For this reason, the advertised ‘low rates’ being advertised by a lender might only apply to a small percentage of the borrower market: for example, those borrowers in a steady job which they have held for more than 3 years with a steady income and low expenses and no unnecessary credit debt (and definitely no Buy Now Pay Later loans!)

Example: Self employed are often not targeted by online lenders – they are just not ‘vanilla’ enough to be able to be processed by bots.

 

2. You don’t necessarily qualify for all lenders

The criteria applied by lenders when considering a loan application can vary enormously.

These days, with over 60+ lenders lending to home buyers, there is a huge range of variations in what lenders consider when assessing whether to lend money to an applicant.

The issue for most borrowers is they don’t know the details and the ins and outs of each lender’s policies.

Plus, lender’s policies are changed regularly by lenders as the macro-economic landscape changes and as their appetite for a particular market segment changes.

Example: We had a client who worked for a major bank but didn’t qualify for a loan with his employer – but we obtained a loan 50% higher with another lender.

 

3. You just can’t change loan products!

Yes, you heard it here first! The biggest failing for many borrowers is not understanding that even what appears to be small changes to their loan product can be seen by their lender as a completely different loan product. And with a new loan product, the lender will charge you all their upfront fees all over again. Plus, you will have to redo all the due diligence you did the first time around to make sure you ‘qualify’ for their current deal.

 

4. Wooed by the Cashback

They sound good and can be a nice way of starting your relationship with your lender. But, they come with their own catches – including a rate which might creep up faster than you were imagining.

Remember, nothing is for free and the major lenders make their money by borrowers looking for immediate gains and then forgetting to keep on top of the on-going costs of their loan.

 

5. Falling in love with the honeymoon or introductory home loan rates

These lower introductory rates can be appealing. And, borrowers can be expected to be attracted by the interest rate quoted for the first year of a contract. However, once the honeymoon period expires, the fine print will often say the rate will revert back to the lender’s standard variable rate – which can be quite a lot higher for the major lenders (their standard carded rates can be breathtakingly high).

Plus, honeymoon packages can attract early exit costs as well as monthly accounting keeping fees – all of which are ways for the lender to make back the money they are giving you on your lower initial rate.

In recent times, these honeymoon packages have been phased out in favour of cashbacks but that doesn’t mean they are gone for good. The marketing gurus at the major lenders will no doubt resurrect these offers as soon as they feel it will help boost their market share.

 

6. Not Checking Exit Costs

The average life of a loan is around 7 years – even though the loan term might be 30 years.

And, no surprises, there will often be exit costs when paying out a loan. Plus, lenders charge legal and preparation fees for the discharge of your mortgage and some will sneak in a service fee.

Whilst not exorbitant, these costs can be an irritant when you are looking to move on because you want to ‘save some money’. And, they can vary significantly between lenders and between loan products.

 

7. Not checking upfront costs

Make sure you check all the fees for getting a loan. Establishment fees, valuation fees, legal fees, the list goes on.

The important thing to note is that these fees can vary enormously from lender to lender.

 

8. Choosing a Fixed Rate loan product

2021 was the year of the fixed rate loan. However, the heady days of low fixed rate loans are over for a while and when the fixed rate period expires, you will be back to paying the currently available variable rate loan.

Fixed rates have less flexibility and fewer options (e.g. limited redraw and generally no offsets accounts) – so you need to make sure they are suitable for you and your cash flow. When a client wants to ‘fix’ a loan, we will ask them if they ever have any surplus cash and if so, a split loan (fixed and variable) might be a good idea so they can park their excess cash in a variable rate split with an offset facility.

Plus, fixed rate loans will have a break cost if you need to exit early (or if you wish to change loan products). The amount of this break cost will be a formula set by the lender.

 

9. Going Interest Only to reduce on payments (Vs Principal & Interest payments)

Interest Only is good when your cash flow is tight as the payments can be significantly lower than a Principal and Interest payment.

However, the Interest Only rates tend to be a little bit higher than P&I rates so make sure you run your numbers on both options if you are thinking of taking out an Interest Only loan product.

Interest Only is often regarded as being more attractive for Investors as principal payments are not tax deductible so it allows the investor’s principal to be utilised in other perhaps more productive alternatives. However, the logic still needs to be applied as it may be that the best short term use of an investor’s funds is to free up equity in their investment portfolio.

A nice to know: when interest rates are low, the greater the proportion of your monthly payment is allocated to your principal repayment. So, when rates are low, you are trading off reducing your principal quickly Vs lower overall payments.

 

10. To have or not to have: Offsets and Redraws

An offset account is where the funds in your savings account are ‘offset’ against the balance you owe on your loan account; reducing the interest you are being charged whilst those funds are in your offset account. This is a great facility when you have variable cash flows with surpluses available from time to time as the offset account is a ’come and go’ account – as you need the funds, you withdraw them.

However, there are often annual fees associated with these facilities (around $300 is a typical figure) so you need to factor in these costs when doing your maths.

The reason why an offset is attractive is that the surplus funds, if held in a normal savings account, will earn you less interest than what you can save if the funds were held in an offset account. Plus, the interest you earn in a savings account is subject to tax whereas the savings in interest from an offset account does not impact the tax you have to pay.

A redraw facility operates similarly to an offset account but you have to physically ‘withdraw’ the funds you need and place them in your savings account in order to be able to use them. For some types of payment transactions this might be acceptable but it does not have the flexibility of an offset account ‘come and go’ benefit.

 

11. The cost of a Professional Package

The major lenders offer “Professional Packages which can provide better rates than their ‘normal’ customers might be paying and might include things like credit cards with rewards etc. It sounds good and it is nice to know you are regarded as a ‘professional’. But, such packages come at a cost – often an annual fee.

So, it is worth comparing these packages with an ‘everyday’ low rate offered by other lenders.

 

12. Loyalty sucks

Sorry to put on a dampener but that is the reality. Once you have a loan with a lender you are now just a source of recurring income. A lender makes their money from their existing customers who do nothing other than pay their loan. The upfront costs to win the customer are amortised over the ‘life’ of the loan. And whilst your loan term is probably 30 years, the average life of a borrower’s loan is often less than 7 years as most borrowers either sell then rebuy or change lenders (so your current lender has to make their money on you quickly!).

 

13. Not planning for your future

Every loan is created upon your circumstances ‘now’. They don’t take into account an unknown future.

However, if you know you are going to move or you know you are going to need to do a reno or knock-down and rebuild, you need to factor in these costs and the likelihood that you will need additional funds at some point in time. If you know how much you might need and when, you can save yourself a lot of heartache and stress if you plan for this upfront.

 

14. I can do this myself (aka not seeking an independent professional voice)

I am leaving the best to last!

When you are thinking about a loan, you should understand the time it takes and the difficulties with making sure you have done all the research you need to do so you make the right choice for you. This is where an experienced broker can help you. They have access to databases and algorithms which allow them to crunch the data from a huge panel of lenders. And, they keep themselves up to date with research on lenders and lender policies so they understand which lenders will be a good fit for you.

Before you even submit an application they will have sorted out those lenders who will lend to you and importantly, those lenders who will not lend to you. And, they will involve you in the final selection so you feel comfortable with who is going to lend you their money. (The good brokers also run your scenario by your chosen lender ‘just to make sure’ you fit).

But there is more. Great brokers check your rates regularly against your lender’s current ‘best rates’ and they offer you lots of things which are good to know on your property (e.g. free property reports) and about finance so you can make informed decisions. The list is actually much longer but you get the drift – brokers.

 

Would you like more information? You can ring us now 1300 989 878 or email us at moreinfoplease@bir.net.au

Before we start….

For further content, please visit https://www.bir.net.au/blog/

And, if you would like a Free Property Report, you can order yours here: https://www.bir.net.au/report-request. You can obtain a report for a particular property, suburb or region in Australia, so you can make informed property decisions. Plus, our suburb reports now provide a comparison report of up to 5 suburbs you want to research.

Any questions, please ring me, Michael Royal 0411 190 474 or email me: michael.royal@bir.net.au. And you can also book a meeting with me: https://calendly.com/michael-royal/chat-re-finance

Now, back to the Article! 😉

What is private lending, who are these lenders and who are their clients?

Adapted from an article written in The Adviser https://www.theadviser.com.au/lender/42889-breaking-the-mould

 

But first, some background

Private lenders…. The term might conjure up all sorts of images!  In an industry which has historically been dominated by the Big 4 banks, there is increasing pressure on the Big 4 and this pressure is coming from all sorts of angles.

Historically, the potted history of lending comes across as a bit of a whirlwind when done in a couple of paragraphs.

Back in the 1980’s, Keating led the deregulation of the banking industry to remove the obstacles which entrenched the position of the major banks whilst restricting competitive forces.  As a result of deregulation, there has been a significant growth in the number of APRA-licensed banks – for example, in June 2022, there were over 80 Australian-owned authorised deposit-taking institutions, 7 Foreign subsidiary banks and 49 branches of foreign banks!!!  That’s a lot of banks for a country with less than 30 million people!!!

With economic peaks and troughs, this list has moved around a lot of banks that have joined then exited the industry.

Around this same time, there was also rapid growth in the specialist lenders market as some entrepreneurial individuals realised that a lot of borrowers were not catered for by the banking sector.  These lenders made their name in the higher risk end of the market before gradually moving towards the domain of the banks.  They also catered for individuals as well as businesses.

Then, with the growth of the internet and broadband, there came the fintechs – lenders who allowed consumers to transact over the internet. Surely, we are seeing the last days of the cheque book! On the internet, there has been a focus on processing simple-to-write consumer property loans and now personal and asset-backed loans.  Interestingly, after the fintech start-ups jumped to an early lead, the big banks are now acquiring quite a few of them in what is one of the classic business strategies ‘it is cheaper to buy than to make’ – creating a win/win as the start-ups have probably been paid a very pretty multiple and the big banks have fast-tracked their way into this new niche.

And so, this takes us to another niche, the one I want to talk about today – the private lenders.  Lenders who don’t want to lend to consumers because of the consumer borrowing red tape but who can, with knowledge of the right factors, lend to what would typically have been regarded by the banks as high-risk clients.

While private lenders were once seen as a last resort due to the high risks associated with their clients, they are now seen as offering finance options to businesses that would otherwise miss out on major opportunities.

The dominance of mortgage industry players has traditionally been steered by consumer sentiment and what is happening in the economic landscape.

The search for more tailored products, greater flexibility, and closer relationships with their lender partner saw non-banks come to the fore, including private lenders.

Despite the similarities of the pandemic with the GFC, the last two years have put immense pressure on the banking industry, resulting in restricted lending as credit appetites tightened up at the major banks.

This systemic issue, coupled with continued demand for lenders that provide borrowers with the flexibility needed, has allowed private lenders to step up and fill an important finance gap embraced by consumers.

 

What is private lending?

Private lending, also known as peer-to-peer lending, occurs directly between individuals. For the investors, it provides the opportunity to make a higher return than rates offered by other investments. For the borrowers, it allows them to receive funding if they do not qualify for conventional loans.

Private lenders still have to abide by similar laws, regulations and rules as banks, from the Australian Securities and Investments Commission (ASIC) to the National Consumer Credit Protection laws and Australian Consumer Law.  However, while there are many rules that compel non-bank lenders to comply with legal and industry policies, private lenders don’t hold a banking licence; and thus, they don’t have the same level of APRA-regulatory pressure.

In most cases, private lending is primarily for business purposes and is classified as “unregulated loans”, in which case it does not fall under the National Consumer Credit Protection Act.

 

Who are private lenders?

Private lenders are often wealthy private individuals or companies that have excess cash from their main area of business and which are seeking to earn a higher return on their excess funds. Consequently, they have a higher risk appetite than traditional lenders (but this risk is not unlimited!).

Michael Volkiene, the CEO at idutch, a platform which brings together brokers and private lenders, explains: “Private lenders source their funds primarily from two different sources, one is investors and two is their own warehouse facilities. A private lender will take more risk based on the strength of the project rather than, I suppose, historical financial analysis.”

As the transactions are subject to higher interest rates, it is also often a short-term contract to enable the borrower to get projects up and running quickly, before moving to a traditional bank.

Platforms like idutch complete a “thorough due diligence” process before allowing a lender onto its panel of private lenders. “We vet their loan agreements, we also physically do site visits…we look through past transactions in terms of completed transactions, [and then] we do reference checking,” Mr. Vokiene says.

The platform works similar to a “dutch auction”, from which its name was derived, Mr Vokiene reveals.

Through the portal, brokers can list their clients’ requirements, such as the loan size and presale limit for a development, and the lenders on the panel can then bid for the business. The platform ranks the most suitable private lenders and facilitates an introduction.

“It creates a competitive furnace, where they bid for people’s business both on cost or price, in terms of interest rates and fees, but also on lending terms and conditions,” Mr . Volkiene says.  “It’s not just about price, it’s certainly a combination of lending conditions which suit your borrower which they can ultimately meet, [and] the speed in the time in which they can do so. But then also achieving a really good value scenario where you’ve got lenders actively bidding against one another, to increase competition to produce the best possible outcome for the end-user.”

Whether it’s first, second mortgages, other bridging products or larger complex lending structures, demand for private lending has been booming. Mr. Volkiene says “In terms of the overall market, we believe it’s a $41 billion market in the private lending space in Australia, and growing at the rate of [around] 8 per cent per annum.” He adds that the pandemic has “pushed” traditional lenders to change the way that they look at historical servicing and provided new opportunities for private lenders.

“What [the pandemic] has done is provide an opportunity for private lenders to understand specific needs at a point in time, what the customer is trying to achieve, and understanding how they’re going to achieve those goals,” Mr. Volkiene says.

As interest rates start to increase, additional pressure will be placed on traditional lending, covenants and gearing positions, which will increase opportunity in the private lending space, he explains. “If you’re talking about almost the perfect environment for this industry to grow, we’re certainly seeing it,” Mr . Volkiene continues. “With the acceptance and uptake and use of private lenders, [brokers are] getting to know who the really good ones are and seeing that it’s a really good outcome for the customer.”

As traditional, non-banks and private lenders are all competing for a slice of the $347 billion business loan market, private lenders are showing their competitive edge through flexibility and quick turnaround times.  Mr. Volkiene outlines that private lenders can typically settle a loan between seven to 14 days.

“From the clients’ perspective if you’ve got a tight settlement deadline, banks may or may not be able to move quickly enough to fill that void,” he states. “The other place that we really satisfy the needs of the market… is taking a second mortgage, where traditional lenders might be capped at a certain loan-to-value position.  [Private lenders have] the ability to come in and provide mezzanine finance or a second mortgage over and above that, which gets that business owner into that property for a short term.” That debt can be reduced over a period of time, or the borrower improves the property and has it revalued so it matches the main bank lender’s LVR.

 

Who are private lending clients?

Typically, private lending clients are property developers or investors. “Customers who have committed to projects [and] are at the stage where potentially they’re going to lose their deposit because they may not have the finances, perhaps squared away as well as they thought they might,” are particularly popular customers, according to Mr. Volkiene. He adds that he sees business owners, developers with limited experience, and property owners all upscaling. “Somebody who owns a property unencumbered, who wants to put two townhouses or two duplexes on their property, but they don’t have pre-sales. [Or] customers that want to purchase a warehouse… [and] acquire the business in total,” Mr. Volkiene says.  “That’s the customers that [we’re] seeing. For example, if a client is doing a development, and unable to go directly with a traditional bank but is able to demonstrate they can run a successful development with the end result of sales, then private lenders are “potentially” less concerned with presales”, the idutch CEO says.

“[The client] will use a private lender up until the point where they [are] attractive to main banks… [And then] will refinance back into a traditional banking lender scenario,” Mr. Volkiene says. “So, it’s more about…  the opportunity is forfeited if you don’t complete [the project] – that’s the mindset of small business owners.”

Private lenders are also gaining popularity among customers who are of “considerable net worth” who want to get a “higher” return on their cash, according to the idutch CEO.

An increasingly common private lending segment is also now emerging as a result of the COVID-19 pandemic. While the pandemic has put immense pressure on Australian businesses, it has created opportunities for many strong-performing businesses, to take advantage of government incentives and seek finance to acquire other companies.

Mr. Volkiene notes that there has been a strong uptake in acquisitions during the pandemic. “COVID has been incredibly challenging for a lot of small businesses in Australia, but what that has done is create opportunities for some people within their sectors to acquire those businesses,” Mr . Volkiene says. “We’ve done a number of those transactions… The natural competitor has seen an opportunistic acquisition and, via the use of private lending, has been able to make that happen in a very short timeframe.”

 

A broker’s point of view

Broker Abhishek Maharaj at Winquote SME Finance has been using private lenders for his clients, often finding niches for complicated scenarios. As an example, he says brokers are frequently turning to private lenders as the major banks and first and second-tier lenders “move away” from development finance. “It’s really the market pressure that’s moved us to look at alternative solutions,” Mr Maharaj says. There is definitely a space for these types of products, the ease of getting organised and done is definitely a lot better than having to struggle with other types of solutions. “From our perspective, it really adds value to our business and a lot of our customers that go into private lending, they know what they’re doing, because most of them are developing and selling… [so] it’s just a shorter-term solution.”

Mr. Maharaj says as the pandemic has brought increased competition in the market, it has also fueled better marketing that has created more acceptance of private lenders when discussing the options with his clients.

“There’s a lot more information out there, which certainly helps us to diversify to not just the traditional banking solutions,” he continues.

The benefit of platforms like idutch is that they give brokers – and their clients – peace of mind. “In every aspect of lending there are your good lenders and your not-so-good lenders, but that’s where idutch has helped us because they’ve pre-vetted a lot of lenders, and that’s what gave us the confidence to use their platform,” Mr. Maharaj says. “In private lending, there’s certain lenders that like different types of developments, so, depending on preference of the project, or what the project looks like, it is very important for us to have that guidance from idutch. It’s a platform that puts the deal to a number of lenders and allows them to choose if they want to do the deal, as opposed to us chasing 10 different people.”

Whether it’s a short-term shift due to current market pressures, [it’s] evident competition in the private lending sector has bolstered during the pandemic. While some hesitancy might remain, players are earning their stripes in the commercial lending market, giving traditional lenders a run for their money.

 

Would you like more information? You can ring us now 1300 989 878 or email us at moreinfoplease@bir.net.au

Before we start….

For further content, please visit https://www.bir.net.au/blog/

And, if you would like a Free Property Report, you can order yours here: https://www.bir.net.au/report-request. You can obtain a report for a particular property, suburb or region in Australia, so you can make informed property decisions. Plus, our suburb reports now provide a comparison report of up to 5 suburbs you want to research.

Any questions, please ring me, Michael Royal 0411 190 474 or email me: michael.royal@bir.net.au. And you can also book a meeting with me: https://calendly.com/michael-royal/chat-re-finance

Now, back to the Article! 😉

 

Author: Michael Royal, Finance Specialist, BIR Solutions www.bir.net.au

March 2022

 

How do you turn a large fortune into a small fortune? Get a reno! 🤣🤣🤣

So, you have run out of space or you just need to spruce things up.  You have a chat with your architect and you see the estimated cost and your heart sinks….

It seems like even the smallest renovation will cost you more these days.  Prices for building supplies have gone up and timeframes have blown out as stock sits ‘on the wharf’ – or worse, at the supplier’s wharf!

At least one thing is solved – funding your renovation.  These days, you have a LOT of options so let’s run through some of the main ones you should consider:

 

1. Use your ‘cash at the bank’ which is sitting in either your savings, term deposit or offset account.

2. Sell down your existing assets and use the cash generated.

3. Increase your home and/or investment loan with your current lender with an equity (‘cash out’) loan.

4. Refinance your home loan and increase it with an equity loan with a new lender.

5. Obtain a personal loan.

 

BONUS ways:

– Your parents 😊

– Your business (if you have one and it has spare cash).  PS Talk to your tax accountant to avoid/minimise Div. 7A loan issues.

 

Now for the details….

 

But first, some abbreviations used below:

> LVR: Loan to Value Ratio – the value of your loan to the value of your property (as estimated by your lender.  For most borrowers, the ‘magic’ LVR maximum is 80%.  Below 80% and there are no additional costs.  If your LVR is above 80% you either need to be in a special class or borrower (eg medico/medical, accountant/lawyer) or you may be charged LMI by your lender.

> LMI: Lenders Mortgage Insurance – an insurance policy you pay to an insurance underwriter to protect the lender in the event of you defaulting.  It is often applied when the LVR is greater than 80%.

> Equity loan (or cash out a loan):  when you receive cash as well as the loan to be financed to either purchase the property or refinance the current loan.

> CCR: Comprehensive Credit Report.  A report was prepared by a credit agency (Equifax, Illion, and Experion).

> DTI: Debt to Income Ratio.  The ratio of your total interest-bearing debts to your ‘assessable income’.

> Security: the asset used by the borrower to secure the loan from the lender.  For renovations it is property.  Only personal loans may look at vehicles as security.

 

Notes:

– You can obtain Cash out with an LVR over 80% with certain lenders and under specific circumstances.  Typically, LMI will be charged and other restrictions might apply.

– Depending upon the lender, the documentation required can vary from the usual documents required to get a loan plus a statement of intent or with some lenders, signed contracts.

 

Other observations:

– For people who generate surplus cash, offset accounts are a good way to save on interest.

– Selling investment assets (property, shares, artworks, etc.,) is a little bit like ‘robbing Peter to pay Paul’. Check with your financial advisor before proceeding.

– The amount you borrow in excess of your current home loan balance would be seen as an equity or cash-out loan by your lender (or a new lender). Some lenders require a lot more detail on the purpose of the cash out than others.  Some lenders require, for example, signed contracts for the expenditure whilst others only need a declaration of intent.

– Lenders have 4 main criteria when assessing a loan – and some lenders look at some more than others:

> Your ‘after-loan’ LVR.

> Your ability to service the new loan balance.

> Your resulting DTI. DTIs above 6 times start to reduce the number of available lenders but some major lenders will go as high as 9 times and there are some lenders who don’t use DTI.

> Your creditworthiness. Your CCR Score.:

1. A credit score of more than 700 is good and less than 500 is bad – and in between requires an explanation.

2. Defaults or judgments are not liked by many lenders.

3. Late payments of your current loans are not liked by many lenders.

 

– Personal loans typically don’t require security over your properties and for renovations, most would be unsecured.

– Personal loans have limited terms (typically 3 to 5 years) whilst an increase in a home loan that is refinanced is typically ‘reset’ for a 30-year term.

 

To summarise:

– To be able to fund your next renovation, there are lots of ways to obtain a renovation loan.

– You need to take into account the various issues impacting your situation and work through which option is most suitable for you.

– Like all loans, the longer you take to repay them, the more you will end up paying in interest.

 

Would you like more information? You can ring us now 1300 989 878 or email us at moreinfoplease@bir.net.au

Before we start….

For further content, please visit https://www.bir.net.au/blog/

And, if you would like a Free Property Report, you can order yours here: https://www.bir.net.au/report-request. You can obtain a report for a particular property, suburb or region in Australia, so you can make informed property decisions. Plus, our suburb reports now provide a comparison report of up to 5 suburbs you want to research.

Any questions, please ring me, Michael Royal 0411 190 474 or email me: michael.royal@bir.net.au

Now, back to the Article! 😉

 

 

 

 

 

 

 

 

 

This is a great time to be a property investor, with the national vacancy rate falling to a 16-year low.

SQM Research has reported that the vacancy rate (the share of untenanted rental properties) in January was a very low 1.3%, down from a moderate 2.0% the year before.

Melbourne, Sydney, and Brisbane, which have the highest vacancy rates in the country, have seen their rental markets significantly tighten over the past year.

In the other capitals, vacancy rates have remained under 1%, which is incredibly low. That makes it very hard for tenants in those cities to find properties; conversely, it’s easy for landlords to find tenants and to justify rent rises.

If you want to build long-term wealth, I can help you buy an investment property. One big piece of advice is to get a pre-approval before you start your search: competition is fierce right now, so if you don’t have your finance in place you’ll probably lose out to buyers who do.

Get your own copy delivered direct to your Inbox – no waiting! Click here: https://www.bir.net.au/contact-us/

Would you like more information? You can ring us now 1300 989 878 or email us at moreinfoplease@bir.net.au

Before we start….

For further content, please visit https://www.bir.net.au/blog/

And, if you would like a Free Property Report, you can order yours here: https://www.bir.net.au/report-request. You can obtain a report for a particular property, suburb or region in Australia, so you can make informed property decisions. Plus, our suburb reports now provide a comparison report of up to 5 suburbs you want to research.

Any questions, please ring me, Michael Royal 0411 190 474 or email me: michael.royal@bir.net.au

Now, back to the Article! 😉

Getting a loan for your next property purchase or refinance is already a big enough issue, without the hassle of a poor credit report. Whilst there are lenders who will lend without referencing a credit report, and there are lenders who will lend to you even if you have a low credit score, the reality is you might end up paying a higher interest rate. It’s all about risk and returns for lenders.

Here are some tips from a recent webinar from a credit repair company. They specialize in ‘fixing the fixable’ on your credit file. Whilst there are some things you (and they) can’t fix, and there are some things you can ‘do yourself’, the reality is that most of us don’t have the time or inclination to deal with parties who we don’t know and don’t know how they will react to our request.

The credit repair businesses do this for a living and it is fair to say that because they do it for a living, they know who will do what and by when. And, many of them effectively have an ‘express service’ relationship with many creditors so they can do things knowing what is possible and what is not. As with most things, you get what you pay for….

Personal

1. Regularly check your credit report. You can get a subscription with Equifax and/or Illion for around $10 per month. This can be money well spent when you are going for a loan.

2. Be aware when enquiring online. Certain low-grade inquiries can affect your credit score – currently, buy now pay later inquiries to reduce your credit score by around 50 points per inquiry. The good news is there may be able to be removal.

3. Missing repayments on home loans, credit cards, etc. can negatively impact your credit score.

4. Like going commando, going without any credit facility or record can be risky. Two years without any inquiries (including no phone plans, utilities, etc) can reduce your score. Solution? Apply for a low fee plan for a phone so you are ‘checked’.

5. Protect your data online. Currently, there are scams on the internet and fake emails pretending to be from the Post Office and other agencies.

6. Income verification is coming.

7. Check your direct debit due dates and make sure you have the funds to meet them.

8. You have 3 personal credit reports issued (Equifax, Experian, and Illion) – whilst 2 out of 3 ain’t bad, when it comes to credit reports the gold standard is 3 out of 3.

 

 

 

 

 

Credit Band

Equifax Experian Illion

Excellent

833-1200 800-1000 800-1000

Very good

726-832 700-799

700-799

Good

622-725 625-699

500-699

Fair / Average

510-621 550-624

300-499

Weak / Below Average 0-509 0-549

1-129

 

 

Business Owners

9. Make sure everything is in order with the business. Your company’s credit score can be affected by late supplier payments.

10. Anything you do personally and commercially affects both your personal and company credit files.

11. There is a Creditor Watch company report you can access via Infotrack.

 

Would you like more information? You can ring us now 1300 989 878 or email us at moreinfoplease@bir.net.au

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BIR Pty Ltd ACN 117185654, trading as BIR Finance, Credit Representative Number 517662, is authorised under Australian Credit Licence 517192 held by LM Broker Services Pty Ltd ACN 632405504

Disclaimer statement: This page provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances. Your full financial situation will need to be reviewed prior to acceptance of any offer or product. This page does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. Where applicable, this page is subject to lenders terms and conditions, fees and charges and eligibility criteria apply.

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