When evaluating the application of a small business for a business loan, banks will normally use the 3 Cs of

credit analysis:

Number one, and most importantly, is character.

The banker has to make a judgement about you, your experience and commitment to repaying the loan.
This is where education, experience and references are all considered by the business banker.

Number two is capacity.

This is the business ability to repay the loan. Your application must discuss exactly how and when, you will repay
the loan (including revenue, expenses and cash flow details). Be sure to include every possible repayment
source you have.

Finally, is collateral.
What forms of security can you provide? This could be property or equipment, owned by you or your business, or
a guarantee from someone who will pay the loan if you cant.
Thats why we have business bankers located at branches, with the authority to make lending decisions. When
you speak to one of our business bankers, youre speaking to the decision maker, and we know how important
that is to small business.

FAQ
1 - What is a Housing Finance Company (HFC)?
A Housing Finance Company is a company registered under the Companies Act, 1956 (1 of
1956) which primarily transacts or has as one of its principal objects, the transacting of the
business of providing finance for housing, whether directly or indirectly.
2 - What are the requirements for commencing housing finance business by an HFC
under the NHB Act?
For commencing the housing finance business, an HFC is required to have the following in
addition to the requirements under the Companies Act, 1956:
1.

Certificate of registration from NHB

2.

Minimum net owned fund of Rs. 1000 lakhs ( w.e.f. 01.04.2014)

3 - Whether an HFC requires registration from NHB apart from Registrar of

Companies?
Yes. An HFC also requires registration with NHB for commencing or carrying on the
business of housing finance.
4 - Is it necessary that every HFC should be registered with NHB?
In terms of Section 29A of the National Housing Bank Act, 1987, no Housing Finance
Company shall commence or carry on the business of a housing finance institution without 1.

obtaining a certificate of registration from National Housing bank issued under Chapter V of
the said Act, and

2.

having the net owned fund of twenty five laks rupees or such other higher amount, as the
National Housing Bank may, by notification, specify.

NHB, in exercise of its powers have from time to time specified the net owned fund
requirements and w.e.f. April 1, 2014, the said requirement is Rs. 10 crore.
5 - Whether an HFC can conduct business without obtaining certificate of registration
from NHB?
No. HFCs cannot conduct business of housing finance without obtaining a certificate of
registration from NHB. Conduct of business without obtaining certificate of registration is an
offence punishable under the provisions of the National Housing Bank Act, 1987. NHB can
also file application for winding up of such HFCs.
6 - What is the procedure for application to the NHB for Registration?
The applicant company is required to submit a physical copy of the application (in duplicate)
along with the necessary documents to the Head Office of the National Housing Bank. The
application can be viewed and downloaded from NHBs
website http://www.nhb.org.in/Regulation/applicaioncr.php. Application should be made in
the prescribed form only.
7 - What are the requirements for registration with NHB?
A company registered under the Companies Act, 1956 and desirous of commencing business
of a housing finance institution, should comply with the following-

1.

2.

either it should primarily transacts or has as one of its principal objects of transacting the
business of providing finance for housing, whether directly or indirectly; and
it should have a minimum net owned fund of Rs. 10 crore.

NHB, after its satisfaction on the fulfillment of following conditions provided under subsection (4) of Section 29A of the National Housing Bank Act, 1987 by a company, may grant
a Certificate of Registration.
1.

HFC is or shall be in a position to pay its present or future depositors in full as and when their
claims accrue;

2.

Affairs of the HFC are not being or are not likely to be conducted in a manner detrimental to
the interest of its present or future depositors;

3.

General character of the management or the proposed management of the HFC shall not be
prejudicial to the public interest or to the interests of its depositors;

4.

HFC has adequate capital structure and earning prospects;

5.

Public interest shall be served by the grant of certificate of registration to the HFC to
commence or carry on the business in India;

6.

Grant of certificate of registration shall not be prejudicial to the operation and growth of the
housing finance sector of the country; and

7.

Any other condition, fulfillment of which in the opinion of the NHB, shall be necessary to
ensure that the commencement of or carrying on the business in India by a HFC shall not be
prejudicial to the public interest or in the interests of the depositors.

8 - What is meant by Net Owned Fund (NOF)?

(a) The aggregate of the paid-up equity capital and free reserves as disclosed in the latest
balance-sheet of the housing finance institution after deducting therefrom 1.

accumulated balance of loss;

2.

deferred revenue expenditure, and

3.

other intangible assets; and

(b) further reduced by the amounts representing (1) investments of such institution in shares of1.

its subsidiaries;

2.

companies in the same group;

3.

all other housing finance institutions which are companies; and

(2) the book value of debentures, bonds, outstanding loans and advances (including hirepurchase and lease finance) made to, and deposits with,-

1.

subsidiaries of such company; and

2.

Companies in the same group, to the extent such amount exceeds ten per cent. of (a) above;

subsidiaries and companies in the same group shall have the same meanings assigned to
them in the Companies Act, 1956.
9 - What are the essential documents required to be submitted along with the
application form to NHB?
A filled-in physical copy of the application form (in duplicate) along with necessary
enclosures stated in our websitehttp://www.nhb.org.in/Regulation/applicaioncr.php to
submitted to the Head Office of NHB. An indicative checklist of the documents required to
be submitted is also provided under the heading Instructions for filling up the Application
in the same page.
10 - What are the different categories of HFCs registered with NHB?
HFCs are categorized in terms of the type of liabilities, by NHB, into Deposit and NonDeposit accepting HFCs and are issued Certificate of Registration accordingly.
11 - Where can one find list of Registered HFCs and instructions issued to HFCs?
The list of registered HFCs is available on NHBs website and can be viewed at
1.

http://www.nhb.org.in/Regulation/RegisteredCompanies.php; and

2.

http://www.nhb.org.in/Regulation/NonValidCompanies.php.

12 - Where can one find list of companies whose application for certificate of
registration have been declined/ rejected/ rejected as withdrawn/ cancelled by NHB?
The list of such companies is available on NHBs website and can be viewed
athttp://www.nhb.org.in/Regulation/RejectedCompanies.php.
13 - Whether an appeal lies against the order of rejection of certificate of registration
and if so with whom?
Yes. Such HFC can appeal to the Central Government within a period of 30 days from the
date on which such order of rejection is communicated to it.
14 - Whether NHB can cancel the Certificate of Registration granted to a HFC, and if so
under what circumstances?
In terms of sub-section (5) of Section 29 A of the National Housing Bank Act, 1987, NHB
may cancel a certificate of registration granted to a housing finance company, subject to
certain provisions, if such company
1.

ceases to carry on the business of a housing finance institution in India; or

2.

has failed to comply with any condition subject to which the certificate of registration had been
issued to it; or

3.

at any time fails to fulfil any of the conditions referred to in clauses (a) to (g) of sub-section (4)
of Section 29A of the National Housing Bank Act, 1987; or

4.

fails-

(a) to comply with any direction issued by the National Housing Bank under the provisions of
Chapter V of the National Housing Bank Act, 1987; or
(b) to maintain accounts in accordance with the requirement of any law or any direction or
order issued by the National Housing Bank under the provisions of Chapter V of the National
Housing Bank Act, 1987; or
(c) to submit or offer for inspection its books of account and other relevant documents when
so demanded by an inspecting authority of the National Housing Bank; or
1.

has been prohibited from accepting deposit by an order made by the National Housing Bank
under the provisions of this Chapter V of the National Housing Bank Act, 1987 and such order
has been in force for a period of not less than three months.

15 - What are the appeal procedure available to a company, aggrieved by the order of
cancellation of certificate of registration or rejection of application for registration?
An aggrieved company may prefer an appeal (in terms of sub-section (7) of Section 29 A of
the National Housing Bank Act, 1987), within a period of thirty days from the date on which
such order of rejection or cancellation is communicated to it, to the Central Government.
16 - HFCs are doing functions similar to banks as bank also provides housing loans.
What is difference between banks & HFCs?
HFCs lend and make investments and hence their activities are akin to that of banks.
However, there are a few differences as given below:
1.
2.

HFCs cannot accept demand deposits;

HFCs do not form part of the payment and settlement system and cannot issue cheques
drawn on itself;

deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not
available to depositors of HFCs, unlike in case of banks.

Acceptance of Deposits
1. What is a public deposit ?
The expression public deposit has been defined in detail in clause (w) of sub-paragraph (1) of
paragraph 2 of The Housing Finance Companies (NHB) Directions, 2001. However, the definition of
public deposit specifically excludes certain deposits like amount received from Central or State
Governments, banks, publis financial institutions and other institutions, from other companies, mutual
funds etc.
2. Can all HFCs accept public deposits ?
For acceptance of public deposits HFCs can be divided into two categories, i.e. HFCs carrying on the
business of housing finance before June 12, 2000 and HFCs commencing housing finance business
after that date.
(a) Companies carrying on business of housing finance before June 12, 2000 can accept deposits
provided they have NOF of over rupees twenty five lacs and have applied for certificate of registration
with NHB before December 12, 2000 and either have been granted the certificate of registration valid
for acceptance of deposits by NHB or their application is still pending for issue of certificate of

registration with NHB.

(b) Companies commencing the business of housing finance after June 12, 2000 can accept public
deposits only after:
(i) obtaining certificate of registration from NHB valid for acceptance of deposits; and
(ii) having minimum net owned funds (NOF) of [rupees two crores or more]*.
*this amount was rupees twenty five lacs or more for HFCs which commenced business before
February 16, 2002.
3 Is there any ceiling on the maximum amount of public deposit which can be accepted by an
HFC?
Yes. HFCs having credit rating from approved credit rating agencies not below A and complying with
all prudential norms requirements can accept deposit not exceeding five times of its net owned fund.
The HFCs having no credit rating can accept deposit only upto two times of its net owned fund or
rupees ten crores whichever is lower provided such HFC complies with all prudential norms and also
has capital adequacy ratio of not less than fifteen percent as per the last audited balance sheet.
4. Is credit rating compulsory for acceptance of public deposits by an HFC?
No. The HFC having credit rating can accept more deposits as per the conditions laid down for
acceptance of deposits in such a case as compared to an HFC without such rating. For detail please
see answer to Question No. 3.
5. What are the credit rating agencies approved for the above purpose ?
The following credit rating agencies have been approved for the purpose
1.

The Credit Rating Information Services of India Ltd. (CRISIL)

2.

ICRA Ltd.

3.

Credit Analysis and Research Limited (CARE)

4.

FITCH Ratings India Pvt. Ltd.

6. Is there any ceiling on the rate of interest which can be offered by an HFC on public
deposits ?
The Housing Finance Companies (NHB) Directions, 2001 provide for ceiling on the maximum rate of
interest which can be offered by an HFC on public deposits. The present ceiling is twelve and half per
cent per annum compounded at intervals not shorter than monthly rests. However, there is no
stipulation with regard to the minimum rate of interest required to be offered on public deposits by an
HFC.
7. Is there any limitation/ restriction on the period for which public deposit can be accepted by
a HFC?
In terms of the Housing Finance Companies (NHB) Directions, 2001, HFCs can accept public
deposits for periods of one year and above and upto seven years only.
8. Whether a depositor can withdraw his deposit prematurely. If so, are there any conditions
attached to the same ?
Subject to any contract to the contrary an HFC, on a request being made by a depositor, may
consider making premature payment of the deposit subject to the following:
1.

No deposit can be repaid within three months from the date of its acceptance.

2.

No interest shall be paid if the deposit is repaid within six months from the date of deposit.

3.

Where deposit has run from six months to one year the interest not exceeding ten per cent
can be paid.

4.

Where the deposit has run for a period of twelve months, the rate of interest applicable shall

be one percentage point less than that HFCs rate applicable for the period for which the
deposit has actually run.
5.

In case of death of the depositor the deposit may be repaid with interest at the contracted rate
upto the date of repayment of such deposit.

9. Can an HFC on its own repay the deposit prematurely ?

No, acceptance of public deposit is a contract between the HFC and the depositor for a definite period
of time. However, any novation of the contract has to be mutually agreed between the parties and
should be in conformity with the provisions of Housing Finance Companies (NHB) Directions, 2001.
10. Are public deposits of HFCs guaranteed by NHB ?
No. The depositor is advised to satisfy himself about the financial position and all relevant aspects
before placing his deposit with the HFC.
A person making public deposits with HFCs should satisfy himself that it holds a valid certificate of
registration for accepting public deposits from NHB. NHB while issuing certificate of registration to an
HFC specifically mentions whether or not it can accept public deposits.
11. Can an HFC provide nomination facility to its depositors ?
Yes. Such facility is permissible to the depositors of HFCs.
12. What are the remedies available to a depositor when the HFC does not re-pay the deposits
on maturity ?
The depositor can file a civil suit for recovery of the amount of deposit. He can also make a complaint
to the Consumer Forums set up under the Consumer Protection Act, 1986. The depositor should also
bring such cases to the notice of NHB for taking action against the defaulting companies under the
provisions of the NHB Act. On being satisfied that the company has defaulted in repayment of
deposits NHB may issue directions prohibiting it from acceptance of further deposits and alienation of
its assets. NHB may also impose financial penalties and take action for imposition of other penalties.
NHB may also file winding up petition against such companies.
13. What details is an HFC required to furnish in the application form soliciting public
deposits?
While soliciting public deposits, an HFC has to indicate, inter-alia, the following:

Particulars of the specified category of the depositors,

Credit rating assigned for its deposits,

Information relating to aggregate exposure to group companies and other entities in which
Directors of the HFC/ HFC have substantial interest ,

Other statements pertaining to Redressal fora available in case of any deficiency, effect of
non-payment of deposits, financial position of the company, regulatory framework etc. as detailed in
Paragraph 6 to the Housing Finance Companies (NHB) Directions, 2001,

Particulars specified in the Non-Banking Financial Companies and Miscellaneous NonBanking Companies (Advertisement) Rules, 1977, made under section 58A of the Companies Act,
1956 (1 of 1956).

Regulation
1. What are the provisions for regulation of HFCs under the National Housing Bank Act,
1987?
The provisions for regulation of the HFCs as provided under the NHB Act, 1987 are:

Requirement of Registration and Net Owned Fund

Maintenance of percentage of assets in specified securities

Creation of Reserve Fund by the HFCs

Regulation or prohibition of issue of prospectus or advertisement soliciting deposits

Determination of Prudential Norms for HFCs

Collection of information as to deposits and to give directions

Issue of directions to the auditors of the HFCs relating to financial statements and disclosure
requirements

Prohibition of acceptance of deposits and alienation of assets

Penalty for violation of the provisions of the Act or the directions issued thereunder. Filing of
winding up petition against erring HFCs.
2. Are there any directions issued by NHB to HFCs under the NHB Act, 1987?
Yes, NHB has issued general directions to HFCs from time to time. The Directions currently in force
are known as Housing Finance Companies (NHB) Directions, 2001. . These Directions relate to
Acceptance of deposits by HFCs, Prudential Norms relating to Income Recognition, Capital Adequacy,
Classification of assets, Credit Concentration etc. They also contain directions to auditors of the HFCs
regarding disclosure requirements.
3. What is the methodology adopted by NHB to regulate the HFCs under the NHB Act, 1987
and Housing Finance Companies (NHB) Directions, 2001?
The methodology adopted by NHB broadly comprises the following:
i.

Entry level regulation, i.e., scrutiny of the HFC at the time of Registration

ii.

Off-site surveillance, i.e., through analysis of the information, return, periodicals etc. filed by
the HFCs from time to time.

iii.

On-site inspections, i.e., visit by the officers of the NHB to the offices of HFCs and verification/
scrutiny of the books of accounts, returns, etc.

iv.

Constant interaction with other regulatory authorities

4. What are the periodical returns, statements, etc. required to be submitted by the HFCs to
NHB?
The returns/ statements required to be submitted by the HFCs to NHB are enumerated below:

Annual Return

Half-yearly Return on Prudential Norms

Quarterly Return on maintenance of Liquid Assets

Auditors Certificate on annual basis certifying the capability of the HFC to repay deposits

Copy of financial statements / Annual Report

Returns on changes pertaining to address of the registered office of the HFC, its Directors
etc.

Filing a copy of the advertisement soliciting Public Deposits or statement in lieu thereof
5. What action can NHB take against the HFCs not complying with the provisions of the Act or
the Housing Finance Companies (NHB) Directions, 2001?
As per the NHB Act, 1987, NHB is empowered to take the following actions:
a.

Issuing specific directions prohibiting acceptance of deposits and alienation of assets

b.

Cancellation of certificate of registration.

c.

Filing of applications for winding up petition

d.

Imposition of financial penalties on the HFC and its principal officers

e.

Filing of complaints before the Magistrate for imposition of penalties

6. What are the provisions under the NHB Act, 1987 and Housing Finance Companies (NHB)
Directions, 2001 for safeguarding the interest of the depositors?
Some of the safeguards under the NHB Act, 1987 and Housing Finance Companies (NHB) Directions,
2001 are enumerated below:
1.

Imposition of ceiling on the amount that can be accepted by an HFC

2.

Imposition of ceiling on the rate of interest on deposits

3.

Provision for nomination facility

4.

Requirement of disclosures to the depositors

5.

Imposition of ceiling on brokerage to be paid by HFC for raising deposits

6.

Prohibition on alienation of assets in case of default in repayment of deposits

7.

Requirement of maintenance of Liquid Assets by HFC

8.

Creation of Reserve Fund

9.

Collection of data periodically to verify compliance with the provisions of the NHB Act and
directions by an HFC to ensure its soundness

Other FAQs

Frequently Asked Questions

1.

What is the role of NHB?

NHB regulates the housing finance system of the country,

extends refinance to different primary lenders and lends
directly in respect of projects undertaken by public housing
agencies for housing
construction and development of
housing related infrastructure.
2.
Is NHB a Government owned Bank or a private
Bank?
National Housing Bank is a statutory organization set
up on July 9, 1988 under
the National Housing Bank Act,
1987. NHB is wholly owned by Reserve Bank of
India,
which contributed the entire paid-up capital.
3.
Does NHB deal directly with public?
No.
4.
Whether
NHB
provides
direct
loans?
NHB grants direct loans to Public Agencies directly or in
partnership with private developers under PPP model to
development
of
housing
projects
as
per
the
Schemes/Guidelines of NHB.
5.
Can I get individual housing loan/mortgage
loan/reverse mortgage loan from
National Housing
Bank?
NHB does not grant any loan directly to individual.
6.
What is a Housing Finance Company (HFC)?
A Housing Finance Company is a company registered under the
Companies Act, 1956 (1 of 1956) which primarily transacts or
has as one of its principal objects, the transacting of the
business of providing finance for housing, whether directly or
indirectly.
7. What are the requirements for commencing housing
finance business by an HFC under the NHB Act?
For commencing the housing finance business, an HFC is
required to have the
following in addition to the
requirements under the Companies Act, 1956:
a. Certificate of registration from NHB
b. Minimum net owned fund of Rs. 1000 lakhs ( w.e.f.
01.04.2014)
8.

What is the procedure for application to the NHB

for

Registration?
The applicant company is required to submit a physical
copy of the application (in duplicate) along with the necessary
documents to the Head Office of the National Housing Bank.
The application can be viewed and downloaded
from NHBs
website http://www.nhb.org.in/Regulation/applicaioncr.php
Application should be made in the prescribed form only.
9.
Is it necessary that every HFC should be
registered with NHB?
In terms of Section 29A of the National Housing Bank Act, 1987,
no Housing Finance Company shall commence or carry on the
business of a housing finance institution without 1. obtaining a certificate of registration from National
Housing Bank issued under Chapter V of the said Act, and
2. having the net owned fund of twenty five lakhs rupees or
such other higher amount, as the National Housing Bank
may, by notification, specify.
NHB, in exercise of its powers have from time to time
specified the net owned fund requirements and w.e.f. April 1,
2014, the said requirement is Rs. 10 crore
10.
What are the different categories of HFCs
registered with NHB? Where can one find list of
Registered HFCs and instructions issued to HFCs?
HFCs are categorized in terms of the type of liabilities, by NHB,
into Deposit and Non-Deposit accepting HFCs and are issued
Certificate of Registration
accordingly. The list of
registered HFCs is available on NHBs website and can be
viewed at
1.

http://www.nhb.org.in/Regulation/RegisteredCompanie
s.php; and

2.

http://www.nhb.org.in/Regulation/NonValidCompanies.
php.

11.
What is the Grievance Redressal Mechanism in
place for customers of HFCs regulated by NHB?
Complainant can lodge the complaint with the
respective housing finance company
(HFC) as envisaged in

the Fair Practices Code adopted by the concerned HFC. An

online (24x7) Grievance Registration and Information Database
System (GRIDS) has been implemented for lodging the
complaint by the complainant against HFCs and its status
tracking for efficient and effective disposal. Further, if the
complainant is still not satisfied with the outcome or his
complaint is not resolved within a given period, he/she can
approach other forms of legal remedies available.
12.
List of HFCs which can take possession of the
property under the provisions of Securitisation and
Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002, in case of defaults in
repayment of loans?

As on 25-07-2014, the list of HFCs notified as Financial

Institution under subclause(iv)
of clause (m) of subsection (1) of Section 2 of the Securitisation and
Reconstruction of
Financial Assets and Enforcement
of Security Interest Act,
2002, by the Government of
India, Ministry of Finance, Department of
Financial
Services
are
as
Name of HFC
S.N.
below:`
1.

Can Fin Homes Limited

2.

Cent Bank Home Finance Limited

3.

Dewan Housing Finance Corporation Limited

4.

DHFL Vysya Housing Finance Limited

5.

GIC Housing Finance Limited

6.

GRUH Finance Limited

7.

Housing Development Finance Corporation

Limited

8.

ICICI Home Finance Company Limited

9.

Ind Bank Housing Limited

10.

India Infoline Housing Finance Limited

11.

Indiabulls Housing Finance Limited

12.

L & T Housing Finance Limited

13

LIC Housing Finance Limited

14

Manipal Housing Finance Syndicate Limited

15

National Trust Housing Finance Limited

16

PNB Housing Finance Limited

17

Religare Housing Development Finance

Corporation Limited

18

Repco Home Finance Limited

19

Sundaram BNP Paribas Home Finance Limited

In addition, HUDCO is also covered under the above provisions,

since it is anotified public financial institution.
13.
Where can one find list of companies whose
application for certificate of registration have been
declined/ rejected/ rejected as withdrawn/ cancelled by
NHB?
The list of such companies is available on NHBs website and
can
be
viewed
at
http://www.nhb.org.in/Regulation/RejectedCompanies.php.
14.
Whether NHB can cancel the Certificate of
Registration granted to a HFC, and
if so under what
circumstances?
In terms of sub-section (5) of Section 29 A of the
National Housing Bank Act, 1987, NHB may cancel a certificate
of registration granted to a housing finance company, subject
to certain provisions, if such company
1.

ceases to carry on the business of a housing finance

institution in India; or

2.

has failed to comply with any condition subject to

which the certificate of registration had been issued to it;
or

3.

at any time fails to fulfil any of the conditions referred

to in clauses (a) to (g) of
sub- section (4) of Section

29A of the National Housing Bank Act, 1987; or

4.

fails-

(a) to comply with any direction issued by the National Housing

Bank under the provisions of Chapter V of the National Housing
Bank
Act,
1987;
or
(b) to maintain accounts in accordance with the requirement of
any law or any direction or order issued by the National
Housing Bank under the provisions of Chapter V of the National
Housing
Bank
Act,
1987;
or
(c) to submit or offer for inspection its books of account and
other relevant
documents
when so demanded by an
inspecting authority of the National Housing Bank; or
v.
has been prohibited from accepting deposit by an order
made by the National
Housing Bank under the provisions of
this Chapter V of the National Housing
Bank Act, 1987 and
such order has been in force for a period of not less than
three months
15.
What are the appeal procedure available to a
company, aggrieved by the order of cancellation of
certificate of registration or rejection of application for
registration?
An aggrieved company may prefer an appeal (in terms
of sub-section (7) of Section 29 A of the National Housing Bank
Act, 1987), within a period of thirty
days from the date on
which such order of rejection or cancellation is
communicated to it, to the Central Government.
16.
HFCs are doing functions similar to banks as
bank also provides housing
loans. What
is
difference between banks & HFCs?
HFCs lend and make investments and hence their activities are
akin to that of banks. However, there are a few differences as
given below:
1.

HFCs cannot accept demand deposits;

2.

HFCs do not form part of the payment and settlement

system and cannot issue
cheques
drawn on itself;

3.

deposit insurance facility of Deposit Insurance and

Credit Guarantee Corporation is not available to depositors

of HFCs, unlike in case of banks.
17.
How to avail refinance from NHB?
Refinance Schemes of NHB as applicable to various category of
Primary Lending Institutions (PLIs) viz, Scheduled Banks
(including RRBs), HFCs, ACHFS and ARDBs etc., along with the
eligibility conditions to avail refinance are available at NHB's
website. PLIs desirous of availing refinance may send their
applications as per the prescribed format for sanction of annual
refinance limit (July-June).
18.
What are the indicative rates of Refinance?
Generally, interest rate on refinance is determined at the time
of disbursement at the mutual consent of NHB and PLI except
for such schemes where interest rates are pre-determined and
available on NHB's website and also communicated through
circulars.
19.
Does National Housing Bank extend loan facilities
to private developers for
construction of
flats/apartments?
No.
20.
Rates of Interest/tenure for NHB Sunidhi and
Suvridhi Deposit Schemes
The relevant details are available on following links:

http://nhb.org.in/Deposit_Scheme/SALIENT_FEATURES.php
http://nhb.org.in/Deposit_Scheme/SALIENT_FEATURES_NHB
_SUVRIDDHI.php
21.
Whether tax saving deposit is available with
NHB?
NHB SUVRIDDHI (Tax Saving) Term Deposit Scheme: It
is a tax saving deposit scheme for individuals & HUFs U/S 80 C
of Income Tax Act. The minimum deposit in the scheme is Rs.
10,000 and thereafter in multiple of Rs. 10,000 with a fixed
maturity of 60 months. Individuals & HUFs can invest
maximum Rs. 1,00,000 in the scheme. The relevant details of
the
scheme
are
available
on
the
link:

http://nhb.org.in/Deposit_Scheme/SALIENT_FEATURES_NHB_SUV
RIDDHI.php
22.
Why does NHB deduct TDS with a ceiling of
Rs.5000/- p.a. whereas it is Rs.10,000/-p.a. for banks?
As per Section 194A of the Income Tax Act, TDS with a ceiling of
Rs.10,000 is deducted in case of following Institutions:
a. where the payer is a banking company to which the
Banking Regulation Act, 1949 (10 of 1949) applies
(including any bank or banking institution, referred to in
section 51 of that Act);
b. where the payer is a co-operative society engaged in
carrying on the business of banking;
c. on any deposit with post office under any scheme framed
by the Central Government and notified by it in this behalf;
And in any other case TDS is deducted with a ceiling of
Rs.5000/p.a.. As NHB does not fall in any of the above stated
category of Institutions, it deducts TDS with a ceiling of
Rs.5000/- p.a.
23.
Does NHB extend RML?
NHB does not extend loans directly to individuals as per the
provisions of the National Housing Bank Act, 1987.
24.
Who are eligible for RML facility?
RML can be availed by Senior citizens of India (above 60 years)
against the mortgage of the house owned and occupied by
them, subject to compliance with the terms and conditions of
the RML product offered by the Primary Lending Institutions
(PLIs).
25.
What are the income tax rules on RML and
RMLA ?
All payments under RML are exempt from income tax under
Section 10(43) of the Income-tax Act, 1961. The Government of
India have vide Notification No.79/2013/F.No.149/54/2013-TPL
dated October 07, 2013 amended the Reverse Mortgage
Scheme, 2008 to include RMLA in the Reverse Mortgage
(Amendment) Scheme, 2013, also eligible for tax exemption.
26.
Is there any standard valuation method for
availing loan under RML?

RML is being extended by the PLIs as per their commercial

judgment and risk perception, in accordance with their
operational processes and procedures.
27.
Can I rent out the property mortgaged under
RML/RMLeA?
PLIs reserve the discretion to extend RML as per their
commercial judgment and risk perception, in accordance with
their operational processes and procedures.
28.
Which Banks give loans on RML?
RMLs are extended by Primary Lending Institutions (PLIs) viz.
Scheduled Banks and Housing Finance Companies (HFCs)
registered with NHB.
29.
What is Credit Risk Guarantee Fund Trust Fund
for low housing?
Credit Risk Guarantee Fund Scheme for Low Income Housing
(CRGFS) was formulated by MoHUPA, Govt. of India in
consultation with DFS, MOF. The objective of the scheme is to
provide credit guarantee support to Collateral
free/thirdparty guarantee free housing loans up to Rs.5 lakhs extended
by eligible lending institutions for Low Income Housing in urban
areas. NHB has been
mandated to manage the Fund Trust
under the scheme, set up by MoHUPA, Govt. of India.
30.
Whether individuals can make use of Credit
Guarantee Fund Scheme for Low Income Housing by
insuring his/her loan against default?
Individual borrowers belonging to the Economically Weaker
Section (EWS) or Low Income Housing Group (LIH) of the
population and eligible borrowers, forming a group or housing
society of at least 20 members in urban areas, are eligible to
get guarantee cover under the Scheme for housing loans
upto
5 Lakhs. However, eligible individual borrowers as
defined cannot directly
approach the Trust to get
Guarantee Cover under the scheme. The eligible lending
institutions will have to apply for Guarantee Cover for
the loans sanctioned and disbursed by them to such
eligible borrowers.
Securitisation and Reconstruction of Financial Assets
and Enforcement of Security Interest Act, 2002,

The Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002, allows banks and
financial institutions to auction properties(residential and
commercial) when borrowers fail to repay their loans. It enables
banks to reduce their non-performing assets (NPAs) by adopting
measures for recovery or reconstruction.
When do properties fall under this Act?
If a borrower defaults on repayment of his/her home loan for six
months at stretch, banks give him/her a 60-day period to
regularise the repayment, that is, start repaying. On failure to
do so, banks declare the loan an NPA and auction it to recover
the debt.
How is the auction price decided?
It depends on the market value of the property. Professional
valuers determine the property value based on which banks fix
a reserve or minimum bid price. The valuations tend to be on
the conservative side as it is a distress sale. If the price fetched
exceeds the banks dues, the excess amount is given to the
borrower.
Where can buyers get information about the auctions?
Banks advertise such sales in at least one English and one
regional newspaper, 30 days prior to the auction. Alternatively,
you can look at websites like www.foreclosure.com.
How can you bid?
Interested bidders must submit their bids in a sealed envelope
to the bank. Along with the bid, they must also deposit a
certain percentage of the reserve price as earnest money
deposit. This amount differs across banks and is refundable if
one withdraws from the process or does not win.
On the auction day, the sealed envelopes are opened in front of
the bidders and the highest bid is announced. Bidders may or
may not get another chance to revise their bids. If you win, you
have to pay up to 25 per cent of your bid amount to confirm the

purchase. The bank may allow you to pay the remaining in 1015 days. You can apply for a loan for the same.
What are the pros and cons of such buys?
Typically, these properties are 20-30 per cent cheaper than the
market price. Also, since the bank had previously lent against
the property, there is clarity on property title.
However, these properties are sold on an as-is basis. There
may be pending dues or even litigations. These liabilities,
unless checked carefully, can get transferred to you
automatically.

SARFAESI Act and Rules

SARFAESI Act (The Securitization and Reconstruction of
Financial Assets and Enforcement of Security Interest Act,
2002) was enacted to regulate securitization and reconstruction
of financial assets and enforcement of security interest created
in respect of Financial Assets to enable realization of such
assets.
The SARFAESI Act provides for the manner for enforcement of
security interests by a secured creditor without the intervention
of a court or tribunal. If any borrower fails to discharge his
liability in repayment of any secured debt within 60 days of
notice from the date of notice by the secured creditor, the
secured creditor is conferred with powers under the SARFAESI
Act
to
a) take possession of the secured assets of the borrower,
including transfer by way of lease,assignment or sale, for
realizing
the
secured
assets
b) takeover of the management of the business of the borrower
including the right to transferby way of lease, assignment or
sale
for
realizing
the
secured
assets,
c) appoint any person to manage the secured assets possession
of
which
is
taken
by
thesecured
creditor,
and

d) require any person, who has acquired any of the secured

assets from the borrower andfrom whom money is due to the
borrower, to pay the secured creditor so much of themoney as
if
sufficient
to
pay
the
secured
debt.
The Central Government has prescribed Security Interest
(Enforcement) Rules, 2002 pursuant to the powers conferred on
it under the SARFAESI Act. The foregoing enforcement
measures must be exercised by a secured creditor in
accordance with the Enforcement Rules and are further subject
to
guidelines
issued
by
the
RBI.
In exercise of powers conferred by SARFAESI Act, 2002, Reserve
Bank of India has issued guidelines to registration, measures of
asset reconstruction, prudential norms, acquisition of financial
assets etc., namely 'The Securitisation Companies and
Reconstruction Companies (Reserve Bank) Guidelines and
Directions, 2003'. The Guidelines are available at the
Downloads segment. Hw
How to start Microfinance Business
India is currently considered the largest emerging market for

microfinance institutions (MFIs). Though it has not reached the

level of Bangladeshi MFIs, we are still growing at a steady pace.
Commonly described as a bank for the poor, microfinance
institutions offer three basic services: savings, credit, and
insurance. Setting up an MFI is not a Herculean taskprovided
your priorities are clear.
For profit or not for profit Before setting up a microfinance
institution, it is imperative to come to a decision about one
basic premise: do you want your MFI to be a non-profit or a forprofit institution? Non-profit MFIs are set up as trusts or
societies with the aid of grants and donations, registered under
the Societies Registration Act, 1860, or the Indian Trust Acts,
1882.
In fact, most such MFIs started out as NGOs. If you decide to
set up a for-profit MFI, there are two models to choose from: a
non-banking financial company (NBFC) or a co-operative. Unlike

an NBFC, a co-operative is entitled to take on savings accounts.

On the other hand, a co-operative presents a few
disadvantages:
A co-operative brings with it ownership. Your customers are
also owners, putting you in danger of losing control of your
organization.
Politicians tend to take over co-operatives, leaving the door
open for power games.
It is usually not considered to be much of a feasible option.
Get a license If you are setting up a NBFC, the Reserve Bank of
India (RBI) is the only authorized body thats registered to grant
you a license. For this, you will need to raise Rs. 2 crore in
capital. The process usually takes about three to four months.
You can also buy existing licenses of defunct companies from
the RBI. This should cost you onwards of Rs. 25 lakh. Check
www.rbi.org.in for more information. To obtain a license for a
co-operative, contact the Registrar of Corporates. Conduct a
market survey This is a very important stage and shouldnt be
taken lightly.
Before narrowing down on a region of your choice, you should
conduct a market research / survey of your intended target
customer base there to get a feel of things. Make sure you do
an in-depth study of the area to understand your customers (in
this case, the poor), based on your own criteria.
Microfinance Business Start a For instance, are you going to
work with the rural or urban poor? The needs of customers
differ in rural and urban areas. So, choose one and work on
your offerings accordingly. Get a foreign investor You will need
additional capital to run your business. This sector finds it
easier to get foreign investors, so try and identify one such
investor before you apply for a bank loan. Run a pilot program
Once you have a fair idea of the city / town you will begin
operations in, it is advisable to run a pilot program in a small
way for about 1-1.5 years. This will help you gain first-hand

knowledge about your customers and their needs, as well as

figure out loopholes in the system and identify areas of
opportunity for your MFI.
Test your customer base to see if they understand you, your
intentions of working with them, and vice versa. More
importantly, the pilot program will help you get a bank loan, as
banks want to see a good track record of your operations
before they sanction a loan. Hence, this stage is crucial.
Personnel required for a MF center To get your MFI up and
running, you will need:
6-8 field staff or lending officers. They should come from
the same class / community of your customer (at least a 10thstandard pass) 1 cashier with an accounting background
1 branch manager with adequate experience in sales and / or
running a small outfit. Your field staff will need to go out and
interact with your target customers (usually women), hold
projection meetings, and encourage them to work with you. Ask
your customers to form Self-Help Groups (SHGs) for the sake of
operational efficiencies. Get a bank loan Capital! You cant do
without it if you want to start a full-scale business. For this, you
will need a bank loan, preferably sought from a nationalized
bank. MFIs fall under the priority sector identified by the
Government of India.

Simply put, 40 percent of a banks assets have to be allocated

here. Before sanctioning you a loan, any bankwhether public
or privatewill want to see a good track record of your
business. In addition, banks look at your management
structure, business plan, and history of Directors. Its advisable
to source your funds from two or three banks in order to get a
substantial capital. No bank will, in any case, give you 100
percent exposure.
The maximum you can borrow from banks (in total) should not
exceed six times the initial capitalthis is considered a prudent

limit. An inspector will inspect your operations on the field both

before and after the loan is granted. Some banks that offer
loans to MFIs include SIDBI, ABN Amro, HDFC (only on the
housing side) and Axis Bank. Time taken: 1-2 months Minimum
loan amount: Rs. 25-35 lakh Type:

Term loan for 3-4 years Documents required

Financial statements (balance sheet, annual report, HR policy,
etc.) Rating Report from any good agency (CRISIL, CARE, etc.)
Details of your organization, its management, board of
directors, operations and products RBI license
Memorandum of Association Recruit and invest in multi-ethnic
employees To run a successful MFI, its important for you to
able to work with people from a variety of backgrounds and
cultures. When recruiting employees, too, make sure they come
from diverse backgrounds and fit in with the ethnic profile of
your customer base. One of the biggest constraints of running a
MFI is getting experienced people. When you want to expand
your operations to other cities, you should ideally do it in a
phased and organized manner, or what is usually referred to as
organic growth. Keep in mind the cultural undercurrents of the
city / town you plan on entering before embarking upon an
expansion exercise. Also, invest in a good software package
that will let you maintain a database of customers and their
banking accountsand train your staff well to operate the
same. S

. What is bad credit?

Bad credit occurs when you get one or more negative listing on your credit file, or you
have a low Vedascore. Depending on how many and the type of listing, it could decrease
your chances of getting a loan with a typical lender dramatically. Below are some
examples of what a bad credit file contains:

Unpaid bills - One of the main ways that people will get a bad credit history will
be because they have unpaid bills. Make sure you keep your payments up to date and
on time and try to pay them back as soon as possible.
Late payments - While late repayments will affect your credit history, they will not
have as much as an effect as unpaid bills.
Previous credit rejections - If you have recently been declined a home loan,
credit card or personal loan then you may get a bad credit rating from this. Many lenders
see rejections as a negative thing, as it shows you're careless about your credit file.
Applying too often - Tying in with the point above, it is a general rule of thumb
that you should only make an enquiry for credit once every 6 months. Any more than this
could raise a red flag to lenders, as it could show that you're struggling financially and
require credit.
Bankruptcy - If you have declared bankrupt then you will have a bad credit rating
that will stay on your credit file from five to seven years. Even if you've been discharged,
your name stays on a Solvency Index. Lenders can access this Index at anytime.

2. Which non-conforming lenders offer bad credit mortgage

options?
There are several non-conforming lenders within Australia that will happily consider a
home loan application from someone with bad credit. These include:
Adelaide Bank
Balmain MB
Bluestone Mortgages
Provident Capital
GE Money/AFIG
La Trobe Financial

Liberty Financial
MKM Capital
Pepper Home Loans
Red Z
Resimac
Widebay Australia (Widebay Capricornia)
WE CAN ALSO HELP YOU WITH OTHER BAD CREDIT FINANCIAL PRODUCTS

Payday loans with no credit check

Personal loans with no credit check
Credit cards and bad credit

3. Am I eligible for a bad credit home loan?

All is not lost as there are credit impaired home loans are available if you can meet one
or more of the following criteria:
If you are not currently bankrupt or in a Part 9 (IX) creditor agreement within the
Bankruptcy Act. You can apply for a home loan with Pepper one day after being
discharged. You'll need to wait two years for other lenders.
If you can put together a minimum deposit of at least 10% (or have enough equity
in the property you want to refinance). Non-conforming home loans will usually lend out
a maximum of 80% - 90% of the property value but any First Home Owner Grant
(FHOG) you may be eligible to receive can be included as part of your deposit.
You will be required to find money to pay any stamp duty and other costs outside
of the loan allocation funds.
A guarantor does not give relief from the necessity of you having to post the
required deposit.

You will still have to put up the required deposit.

You will need to prove you have a sufficient, ongoing income to service the loan
repayments. Usually people rely on just pensions or those who are unemployed can not
obtain a non-conforming home loan.
Any outstanding debts, whether in default or otherwise must usually be declared
and fully consolidated into your new mortgage and be fully paid out on settlement. Even
taking into account of the consolidation of all outstanding debts your new home loan can
still not exceed the LVR as set out by the lender.

4. Can I qualify for a bad credit loan if I'm a first home buyer?
You can still apply for a bad credit home loan if this is the first home loan you're applying
for and you have the deposit ready. The same tips and information on this page applies
to first home buyers, as applying for your first home loan as opposed to your second or
third makes no difference to your eligibility all things being equal.
Keep in mind that if you're applying for your first home loan you should still be careful of
your income and your deposit size. This is because unlike a buyer with a proven track
record of paying off a home loan, you might not have an extensive credit history your
lender can look for, so the other aspects of your application will come under more
scrutiny.Here's how to navigate your way into the home loan space so you know which
direction to take.

5. How do I get a home loan with bad credit?

One of the main factors that will determine whether you will be accepted will be your
income and the nature of your bad credit. Typically, if your bad credit was triggered by a
life event then lenders tend to be more understanding. However, if you were aware of
your bad credit but continually and knowingly made it worse, then lenders may be more
skeptical. Regardless, researching about your options, attempting to fix up your credit
and choosing a specialist lender to go with should help you get back on track.Research
what options you have:
Opt for a specialist lender - There are number of lender who specialise in
dealing with borrowers who have bad credit. These lenders will normally have a criteria
in place, such as a deposit of at least 10%, not currently in mortgage arrears and not
currently bankrupt.
Speak to a mortgage broker - A mortgage broker could have access to a few

bad credit home loans in their database, so it's worth calling up and asking what your
options are.
Develop a plan to get your credit file back on track:
Saving up for a deposit - Getting back on track is the first step to saving up a
significant deposit. This could include finding employment and gradually saving up the
amount you need.
Credit repair - While bigger impairments such as bankruptcy are hard to repair,
the smaller impairments such a late repayments, inquiries and defaults can be paid back
and removed from your file.

6. What tips are there for applying for a home loan with bad
credit?
Get expert advice or financial counselling - If you can afford the services of a
financial planner, it might be a good idea to talk about the best strategy in repairing your
credit. Alternatively, the Australian Government provides a free financial counselling
hotline to offer general advice.
FREE FINANCIAL COUNSELLING

If you would like free financial counselling you can call the Financial Counsellors hotline
on 1800 007 007. It is open from 9:30am to 4pm, Monday to Friday
Have a budget to show a savings history and get rid of existing debts When you have a budget you can show your lender exactly where your money is going
and how much is being saved. You will be able to see whether there really is room in
your budget for a mortgage repayment each month and you will have a plan to manage
your home loan and other expenses. Also consider reducing or paying down any credit
cards if you have any.
See where you currently stand - Obtain a copy of your credit report to find out
exactly what you're dealing with. Having a copy of your credit report before you meet
with a bank or mortgage broker to apply for a home loan can also help you uncover
whether there have been any mistakes on your credit report which have led to you
having bad credit. These can be listings such as a bill being declared overdue when you
have actually paid it, or someone fraudulently using your credit card details. In these

cases bad credit can often be fixed.

Be honest if you have bad credit - If you are honest about the fact that you
have a less than perfect credit history, your mortgage broker or lender can more easily
find a way around the issue, rather than finding out too late that there is a better type of
loan could be applying for to ensure success.
Provide accurate information in your application - Your lender will ask you
about your income, your expenses, your assets and your liabilities so make a list using
your budget to provide accurate figures for each aspect of your finances.

7. Are there any home loan features I should avoid if I have bad
credit?
Applying for a home loan if you have bad credit is about more than just applying and
hoping you are accepted. You also need to make sure that your home loan will help you
manage your finances responsibly in the future, and not be tempted into making your
bad credit history even worse. If you have a bad credit history consider avoiding features
which may tempt you into spending more than you can afford, such as:
Line of credit. A line of credit allows you to access the equity in your home up to
a value decided on by your lender. Often you don't need to make repayments until you
have reached the limit of your line of credit, and while a line of credit has a lower interest
rate than most credit cards or personal loans, it requires significant discipline to not
spend more than you can afford to repay.
Redraw facility. Making additional repayments to your home loan is one of the
most financially responsible things you can do, so make sure you look for a home loan
which allows you to make additional repayments without attracting a fee. At the same
time having a redraw facility on your loan can make it very easy to access those funds
again, undoing all of your hard work.

8. What does my credit history report contain?

Your credit file includes information pertaining to when you made the application, what
type of credit you applied for, how much you requested, as well as other information
regarding your repayments. For example, if you have ever filed for bankruptcy or have
defaulted on a loan or had a court judgement against you, this information, including
pertinent details, will be found in your credit history file.

9. Are there any risks with a bad credit lender?

Just because certain lenders specialise in loans for people with a poor credit history, it
doesn't mean that obtaining such a loan is easy or that bad credit home
loans offer guaranteed approval. Since these types of loans are riskier for lenders, they
tend to be extremely stringent, demanding higher interest rates and fees to cover
themselves in case the applicant defaults on the loan. The thought pattern behind this is
that the applicant has a bad credit rating for a reason and even if they have changed
their ways, there's no guarantee that he or she won't default on the loan at a later date.
Additionally, with the new credit reporting code introduced in 2013, as well as the
National Consumer Credit Protection Act (2009) and reforms to the Privacy Act 1988,
lenders have to be even more careful to ensure they don't end up on the wrong end of
the stick. This is because the legislation obligates lenders to only recommend financial
products to their customers that they can easily repay without suffering any financial
difficulty in the process. If the lender approves a customer for a loan and the person
cannot make their repayments and subsequently demands an investigation, the lender
can end up losing their money if the independent investigator finds the customer to be in
the right. That is, that the lender recommended a loan deemed to be unsuitable for the
borrower's circumstances.

10. What do lenders assess in terms of credit history?

When a lender conducts a credit history check, they look at a number of factors which
are then used to determine whether the applicant poses too much of a risk for them to
approve their loan.
Credit application frequency
One thing all lenders analyse when assessing your credit rating is how often you apply
for credit. The higher the number of applications registered in your credit history file and
the more frequent they are, the less chance you will have of getting a loan. Of course,
they will first ask you if there was a good reason for the frequency of the applications.
Also, a lender could reject the application if there are a lot of credit applications on file
but the borrower claims to have only a few debts. This is because the lender could
simply believe that the applicant is being untruthful about their existing loans.
Type of credit applied for
The type of loans you applied for will also be important to a lender analysing your credit
history. For example, someone who has applied for a large number of credit cards may
be declined immediately because it leads the lender to believe that such an applicant is
too reliant on credit. On the other hand, someone who has a large number of
applications for home loans is understandable because they could simply be looking to
find the cheapest offer.

Defaults, bankruptcies and other red flags

As with every lender, a non-conforming lender will look at all the red flags in your credit
history. However, they will also demand an explanation regarding each entry and you will
have to be thorough in the details you provide. If you try to hide something, you wont
improve your credit rating, you will simply make the lender more suspicious and this may
lead to your application being declined on the grounds that you were not being
transparent enough or fully honest about your circumstances.

Peter and Mary apply for a bad credit home loan

Peter and Mary had been paying their home off for the past
20 years. Unfortunately, Peter fell ill and had to take four months off work. For the first two
months they were able to cover the home loan repayments on the amount in their redraw
account and Mary's wage covering day to day expenses. It was after this two months that the
couple started to struggle, having already taken a repayment holiday, bills were piling up and the
home loan repayment was deemed more important. Numerous letters from the lender sat on the
kitchen table. Peter and Mary eventually fell into arrears on their current mortgage.
A few months later, Peter was able to go back to work again and their finances started getting
back on track. They wanted to refinance their home loan to extend it to 25 years instead so they
could get back on track with smaller repayments. Since they already had a black mark with their
current lender, they refused their application to refinance. Peter and Mary did a significant
amount of research online and decided to apply for a refinance with Pepper home loan. They
already had the deposit ready from the equity they had built in their property. Pepper were happy
to see that Peter was back in employment and offered them a loan.

11. Can I get a home loan with paid defaults on my credit file?
You can still get a home loan if you have paid defaults on your credit file. These will
appear on your credit history and your success will depend on the lender's policy.

12. My partner or spouse has bad credit, does that affect me?
If you decide to apply as a joint application for your home loan, your lender will take into
account your partner or spouse's bad credit history. While your good credit history may
offset some of that, the banks will make an assessment based on the whole and will let
you know of the outcome. If you're declined by a typical lender, then you may need to

speak to a bad credit specialist lender.

13. I'm currently on the pension, am I eligible for a bad credit

home loan?
While lenders tend to accept pension payments as a source of income, you tend to need
another source of income to be able to service a home loan. This is because a home
loan is such a big amount, that Centrelink payments alone, won't be able to make to
make the repayments. Other income sources include employment and assets that
generate cash flow.

14. Do you qualify for a bad credit home loan?

The answer to this question will depend on the loan you apply for. Some lenders will
clearly state which loans cater to which types of bad credit. Generally speaking, there
are loans offered to most types of bad credit applicants, with the worst cases receiving
higher interest rates. To find out if you qualify for a bad credit home loan lodge an
enquiry with a specialist mortgage broker today.

15. Are there different types of defaults?

Defaulting on a utility bill and defaulting on a home loan payment are different things.
Missing your utility bill payment will be listed as an unpaid default on your credit rating.
By comparison, being 'in default' on your home loan means you have unpaid arrears
outstanding on your account that need to be paid. If you are in default on your home
loan, chances are the amounts you owe are much higher than just the missed payment
amounts. This is because your lender is likely to charge you overdue fees or missed
payment fees, along with default penalty interest rates on top of your regular interest
charges.

16. What are some of the documents that I would need to

provide?
Full documentation
PAYG - Typically last two pay slips with a letter confirming employment, latest
group certificate, tax assessment notice of three months bank statements.
Self employed - Last two years of tax returns plus tax assessment notices.

Low or alternate documentation

ABN registered for 24 months though some lenders have a 12 month minimum
Declaration of financial position, including business bank statements, business

activity statements and accountant's confirmation

17. Are there banks that overlook defaults on bad credit?

Yes, there are a number of non-conforming lenders within Australia that will overlook
your bad credit history. Aside from this, many of the big banks may overlook a small
default if your application is particularly strong.
YOUR CREDIT FILE

If you do have defaults listed on your credit report, there are some
things you can do to improve your chances of being approved for a home loan. Here are
some simple steps to take:
Write a letter for your default explaining how it occurred
Provide evidence to verify your explanation
Pay off any unpaid defaults and ask the credit provider to change your listing to a
paid default instead of an unpaid default
Save as much money as you can. A larger deposit will go in your favour
Search for a lender that is more likely to approve your application, despite your
defaults

18. Are there any advantages and considerations of a bad credit

home loan I should know?
Advantages
Get into the housing market sooner. One of the biggest advantages of
obtaining a home loan through a bad credit lender is that you get to enter the housing
market now instead of waiting until later. This gives you the ability to start proving to your
lender that you are capable of keeping up with your financial obligations and making

your payments on time.

Can refinance to a regular home loan later. If you can manage to improve the
value of the property you bought or pay down your home loan balance enough, you also
have the opportunity to refinance your bad credit home loan over to a mainstream
lender. This could mean slightly lower interest rates after you've proven that your bad
credit rating was a temporary downfall in your past that you've since amended.
Considerations
Higher interest rate. Perhaps the biggest disadvantage to a bad credit home
loan is that the interest rate is often higher than what is available from the big banks.
This is because non-conforming lenders adopt a 'rate for risk' policy. As their risk
increases, so too does your interest rate.
Higher repayments. Due to the higher interest rate, this will also mean you could
end up making higher repayments each month. If you are able to make your repayments
on time, many non-conforming