Lenders For Low Income Earners

No lender will lend to you without you demonstating you can repay the loan. In the past there have been court cases where it was determined the bank reclessly lent money to someone who coudn't afford it and the judgment was they didn't need to pay the loan. So lenders have a duty to make sure you can afford to repay the loan.

There are some small lenders who don't check incomes too hard. LVRs are 60 to 70% and rates are high – but they are unlikely to lend for small country towns.

Your best bet is with the major banks and limit the loans to 80% or less to avoid LMI (LMI won't approve small town lending, or maybe just 1 or 2). Try your best to increase incomes and rent and you will get there.

With Business Income you will need 2 Years Tax returns before it will be considered by most lenders.

Terry has already pointed out that lenders wont lend where they knowingly are aware of the presence of  Vendor Finance.
(This is of course unless you get approval at National Credit level and can show it is part of an overall Business income strategy).

Ryan,

I have a business that looks at lending funds to people that can service a loan for the purchase of property with interest rates that closely match what the major banks offer.

Send me an email of what you are trying to do and maybe I can be of assistance.

regards
Walter Gordon
[email protected]

by Majella Corrigan
From Money Magazine, July 2006

If you don't have a credit rating, don’t own a car or house and your income is low or solely from government benefits, it has been near impossible to borrow from a mainstream lender like a bank.

Now two major banks have separately entered the low-income loan market, offering loans of up to around $3000 to enable people to borrow and also to build up a credit rating.

In the past, so-called pay-day lenders made their presence felt in this area, but this was often a debt trap for those with little spare cash. Pay-day loans – marketed as cash to tide you over until the next pay day – could involve enormous rates of interest, as much as 48%, making it difficult to repay and often making the borrower’s financial situation worse.

Now ANZ and NAB both have low-income loans on offer through their relationships with separate charity organisations.

ANZ announced in late May it had joined forces with the Brotherhood of St Laurence to provide a program called Progress Loans, which will give people on low incomes access to loans between $500 and $3000 to pay for essential items. Three loan officers funded by ANZ will be at the Brotherhood’s offices at Fitzroy and Frankston in Melbourne to guide prospective borrowers through the loans process.

Each loan will have a $40 approval fee and the annual interest rate is 12.7%, which ANZ says is in line with rates for most unsecured personal lending. It plans to charge this rate to make the program self-sustaining.

The Brotherhood and ANZ will pilot the program for six months, after which it may be extended to more partners and states.

To be eligible for a Progress Loan, applicants must have a Health Care Card or Pension Card issued by Centrelink, have lived in the same residence for more than six months and be up to date with utility bills and rent.

Tony Nicholson, executive director of the Brotherhood, said in a press release that many people on low incomes had traditionally been excluded from affordable mainstream financial services. They often had to rely on very expensive forms of credit or simply go without household items that most Australians take for granted. “Families we work with survive without a fridge or washing machine, using an esky to keep food cool and visiting the laundromat on a daily basis,” he said. “Over the space of a year this adds up to more than the cost of a personal loan.

“With Progress Loans we will be able to assist many of these families to borrow money via a mainstream credit market, in a way which is sustainable and protects them from exploitation. Our research and experience indicates that Progress Loans will help more people on low incomes build a base of assets, take more control of their financial circumstances and overcome poverty traps associated with financial exclusion.”

The research also showed that people on low incomes were generally good at repaying, with a default rate of just 0.9%.

National Australia Bank in April this year expanded its low-interest loan offering, which is in partnership with the Good Shepherd charity organisation. The loan program is called StepUP and is offered in NSW, Victoria, South Australia and Western Australia.

It lends amounts of $800 and $3000 at 6.99%. It is seen by NAB as a break-even product.

The StepUP loan is also seen as a way of getting people used to making repayments and building confidence that they can do this. It is seen as bridge between NILS, a no-interest loan scheme run by Good Shepherd, and access to mainstream credit. NAB is also considering a low-cost insurance product and a low-interest loan for basic business enterprises.

No william is not suggesting that and these loans are not available for any form of property purchase.

In fact the new National Credit Code which comes into effect July 1 will make it harder for people on limited income to be able to borrow as serviceability models tighten and emphasis goes back to being able to afford repayments (like it should be).