Amidst all the restrictions and issues around the current COVID-19 lockdowns, there is one important issue that caravan loan holders should not overlook – your credit profile. Those facing financial hardship due to business closures and loss of work due to the restrictions may be presented with difficulties in making their scheduled monthly caravan loan repayments. Failing to meet repayments can escalate into a loan default scenario. This can have long-term ramifications. When borrowers default on loan payments, lenders report these defaults to the Credit Reporting Agencies. These reports are marked negatively on individual credit reports and result in a lowering of a credit score.
We highlight the importance of your credit score and your overall credit report in regards to your existing and future credit and loan plans.
Credit Scores and Reports
A credit report also referred to generically as a credit profile, is a report compiled by agencies on an individual’s creditworthiness. That is how they rate in terms of risk for lenders. These reports are compiled with reports made by lenders, banks and providers of services and utilities that issue bills to their customers. Late payers are reported to the agencies and this is listed on the individual’s credit report. Payments related to all types of loans, credit cards and other household bills such as power and telecommunications as well as council rates and charges.
Applications for loans and credit card limit increases are also reported to the Credit Reporting Agencies and noted on a credit profile. Multiple applications for loans or credit cards can impact negatively as it may convey a desperate situation to source funds. By using a lender such as Jade Caravan Finance to source a loan quote from across our multiple banks and lenders, does not attract the same negative effect on a credit profile.
Credit reports are created automatically when a person applies for or holds a credit or loan account. Lenders report on performance in line with the guidelines.
These entries on a credit report are accumulated and from the entries, a value or credit score is calculated. Scores range from 1 to 1200 with a high credit score is considered good and a low credit score bad. These scores and reports are compiled and held by Credit Reporting Agencies which include Ilion, Experian and Equifax.
When assessing a loan application, lenders will refer to a credit profile and score as a normal part of the assessment process. A low credit score and bad credit profile may mean a lender will not offer as good an interest rate on a caravan loan as the borrower poses a perceived higher risk. Alternatively, additional strict conditions may be placed on the loan such as a lower total loan amount being approved. This would mean the caravan buyer may have to pay a deposit to reduce the amount being requested.
Checking and Repairing a Credit Report
Individuals can request a copy of their credit report from the agencies. You are entitled to a number of free copies in a certain timeframe, so don’t be tempted by some organisations that charge for this service. Check the free options first.
The Australian Government provides extensive information around credit scores and reports at https://moneysmart.gov.au/managing-debt/credit-scores-and-credit-reports The information includes steps that individuals may be able to take to have any incorrect or outdated entries on their report excluded.
If you are intending to apply for a caravan or any other loan and you think you might have some issues from past loans, it can be wise to take action before making a new application.
Actions and Outcomes
There are actions that individuals can take to maintain a good credit score and avoid the serious outcomes caused by having a bad credit profile.
When taking on a caravan loan, ensure you continue to meet the repayment schedule as agreed to. Missing payments on a regular basis can lead to your caravan being repossessed. With a secured caravan loan the goods are used as security against the loan. This gives the lender the right to repossess the goods if the borrower fails to meet their commitments.
When goods have repossessed the lender then on-sells them to recoup what is owed to them. If the monies outstanding are not met by the resale, the borrower is still liable for the balance.
If your financial circumstances change at any time during your loan term and you face difficulties in meeting your repayments, you should address the situation and not simply default. If you face hardship due to COVID-19 restrictions or other natural disasters, support through government agencies and lenders may be available. Reach out to see what is on offer.
Contact your lender and discuss the options that they may offer you. If your situation appears to be continuing for a longer-term, consider contacting us to discuss refinancing your caravan loan to a lower more manageable monthly repayment.
When taking out a new loan, pay close attention to repayments and terms and opt for realistic amounts that you can manage over the term of the loan. Additional payments are permitted so you can always pay a little extra against your loan if your circumstances permit.
By using Jade Caravan Finance as your lender, not only will our multiple-lender sourcing of the best and cheapest quote for caravan finance, will not impact negatively on your credit score but you will also receive the expertise of our consultants to structure a loan that works for you and your credit profile.
Contact 1300 000 003 for a quote on a caravan loan
DISCLAIMER: THE DETAILS AND INFORMATION IN THIS CONTENT ARE PREPARED AND PRESENTED PURELY FOR INFORMATION AND NOT INTENDED IN ANY WAY AS THE SOLE SOURCE OF FINANCIAL ADVICE FOR CARAVAN PURCHASING. IF ADDITIONAL FINANCIAL ADVICE IS REQUIRED, READERS SHOULD REFER TO A FINANCIAL ADVISOR. NO LIABILITY IS ACCEPTED FOR ANY ERRORS, PRODUCT DESCRIPTION VARIATIONS, OR OTHER MISREPRESENTATIONS OF INFORMATION AS PRESENTED.