In a perfect world, no one would ever have trouble with repaying their home loans. They’d simply take out money at a rate they could afford to repay, then steadily make the payments each month until they were squared away. The real world isn’t perfect, though. Plenty of people in Australia have loans with increasing rates that they’ll soon be unable to afford, if they’re not already.
As a lender, it’s important to be smart and find loans you can afford to repay. As interest rates in Australia continue to climb, plenty of borrowers find themselves facing mounting financial trouble. If possible, you’d like to avoid being one of them. A good financial strategy and an affordable low-doc loan can help make that happen.
High interest rates put pressure on borrowers
Lots of people worry about how to get a loan with a bad credit rating. Once they finally get that loan, there are still additional challenges, though – those borderline loans are often the toughest to pay off. And in fact, Standard and Poor’s (S&P) reported that consumers today are having more trouble than usual – the nationwide rate of mortgage delinquencies recently rose from 1.15 per cent to 1.25 per cent.
“The majority of underlying loans in the portfolio are variable-rate mortgages, and a rise in interest rates is likely to exacerbate debt serviceability pressures, particularly for borrowers with higher loan-to-value ratios and limited refinancing prospects,” S&P said in a statement.
In other words, as interest rates rise across Australia, people are having trouble keeping up. Lenders should be wary of this growing trend.
Good financial habits lead to greater stability
While rising interest rates make it tough for people to keep up with their mortgages, there are some bad habits people have that exacerbate their debt troubles. For example, the Australian Securities and Investments Commission found that when people borrow more money to pay off their existing loans, it tends to make their debts even larger in the long run.
Improving your habits is key. Rather than look to refinance or consolidate debts, the best strategy is usually for people to save wisely and pay those debts off. Although of course, there are some situations where you need to purchase a home soon and urgently need help, which is where bad credit home loans can be of assistance.
Starting with a responsible loan
To avoid finding yourself in a situation where you’re buried in debt, the best course of action is to have a good loan in the first place – one with reasonable terms that you can realistically expect to pay off.
At Redrock, we take pride in our responsible lending. We offer low doc loans, but we do so in such a way that our customers can stay in good financial shape and pay their debts on time. Our team of lending managers will see to it that you get the right loan for you.