Australians today have many options for borrowing cash for quick financial fixes. While many of our folks are short on debt payments, credit card bills, utilities, household needs, and other major expenses, others may use this loan service to cover their rent.
Rent and other immediate expenses are one of the many expenditures Australians had to borrow cash for last year. Covid’s sick grip on the country’s health and economy caused loaning to skyrocket since the peak of the epidemic lockdowns from two years ago.
The need to borrow to cover major life expenses continues today. Arrears are among the serious financial issues that if further delayed, could mean hefty penalties or worse, get them evicted by the landlord for non-payment.
Today we need to take a look at the option of rent arrears loans and what they mean for Australians and the local lending industry.
The mechanisms of a rent arrears loan
Rent arrears loans are pretty much the same as local industry-standard personal loans, except they are designed to settle arrears in a timely manner. The loan range can be as minimal as a hundred dollars or up to a few thousand dollars. They are usually not huge financial undertakings and are more open and accessible to facilitate fast and easy borrowing. At most, the maximum loan amount can be up to AUD $10,000 per instance.
The basic requirements and eligibility are the same as well: it is open for permanent residents and citizens of legal age with a national ID, contact details, proof of residence, and a few other basic financial documents. These other documents will range from recent payments, bills, employment details, proof of income, and other financial proof, as needed.
Depending on the lender, there are either interest rates or none, in combination with associated fees. These loans are longer than most of the minimum personal loans, and can go for up to a full year for the repayment duration.
How the application and payout works
With rent arrears loans, most lender entities will ask for proof of employment, proof of income for up to the last three months, contact information such as email address and mobile number, and an online-enrolled banking method for repayments. The loan will be disbursed through Centrelink via the borrower’s MyGov details, or through another online payment method. The whole application process is accomplished online, formalised with a signed agreement, and quickly dispatched once approved within 24 to 48 hours.
Just like the common personal loan, some stringent rules also apply. The online banking account set up for repayments are scheduled installments automatically paid through direct debit. One of the most crucial elements of its payment arrangement is having sufficient balance to cover your installment every month or agreed payment period. There are penalties and late payment fees that apply when you fail to pay or have zero balance when the due dates arrive.
The role of credit scores on arrears loans
Just like the majority of personal loans available in the local finance market, a basic credit check is required for these types of loans. However, with the big demand for these local services, many lenders now also offer bad credit loans. The compromise for it is in the form of higher interest rates and other possible stipulations and conditions.
The basic rule is, the higher the credit score and repayment rate and ability of the borrower, the better set of loan terms they receive. The lender may or may not impose an early repayment penalty, so also keep that in mind when shopping for the best possible loan offers.
Here’s a basic credit score chart with the upper half getting the better terms, while those on the second lower half will get certain impositions applied to their loans.
Credit Score Range
Illion
Excellent 800 – 1000
Very good 700 – 799
Average 500 – 699
Fair 300 – 499
Equifax
Excellent 833 – 1200
Very good 726 – 832
Average 622 – 725
Fair 510 – 621
Most lenders may follow the popular Equifax credit score range to determine the thresholds for what constitutes as a good credit standing (along with other finance-related requirements and eligibilities). As mentioned, those below 600 may still be allowed to borrow at a certain threshold, but expect higher interest rates and penalties added.
A realistic look at arrears loans
Getting an arrears loans for your rent is a viable choice if you have the money to cover it until the last payment. You need finances to cover the whole loan cycle and commitment to follow the lender’s terms. This loan is a good lifesaver when you are suddenly short on cash or got unemployed and can’t pay rent for a month or a few months.
As with any type of personal loans, never underestimate the amount and the terms. Many variables can still affect an otherwise perfectly planned loan down the line. The longer the loan takes, the higher the risks, so a concrete plan with a backup is recommended to avoid penalties and lose more money.
What are my other options?
We are merely presenting all possible outcomes of an arrears loan. No one is questioning anyone’s decisions and ability to complete loans. Looking at financial situations realistically will help you avoid debt traps and more cash drain expenses after your loans.
From this guide, you should already have a fair outlook and assessment of what your possible loan will be, should you pursue the case. The basic reminders we have laid out will hopefully protect you from derailing from your loan commitments and help you get back on your feet again.
In case an arrears loan isn’t a possibility, you can still go for other options, such as government financial aid in the form of household relief loans and certain state-based housing assistance or benefits programs. Next to these options are using other forms of credit through credit cards and financial institutions. These options have to be at the same level or lower than your original option, or else, it means more expenses in the long run. As one of the last options, you can borrow money from friends and relatives who will undoubtebdly forego with any interest and penalties as long as you pay them back.
