Applying for Loan when On CenterLink

[rachels]

My friend who is self employed has recently had a bad couple of months and is considering going back to Tafe to learn some new skills. They might have to go on Centerlink first though to help pay for the course costs and to cover if their income drops anymore. They have just enough equity though to put a small deposit on a cheap IP in the regions so they are going to look to buy a place they can renovate and hope to make it into a profitable investment. This might be there last chance for awhile to buy an IP while they still have some books to show income in last quarter. Believe me, this is the last thing my friend wants to do - to apply for Centerlink help but they need to know they will have enough to live on if their income drops any further. They believe that by buying the IP it could help them to be in a better position in the future.

They won't be getting a full benefit, maybe just a small amount to bring their current earnings up to a livable amount.

What they would like to know is - by going on Centerlink, will the banks actually know this when their broker sends in an application and if they do will they see it as a bad thing and refuse credit?

 

[Rolf Latham]

Hi RS

If I was ur friends broker, I dont think id be inclined to put such an application up period.

If the biz is that sick now, there is no guarantee that it would get any better, thus more debt = bigger risk

ta
rolf

 

[skater]

If the biz is that sick now, there is no guarantee that it would get any better, thus more debt = bigger risk

So.....you wouldn't have been my friend ten or so years ago?

This is in no way a recommendation, and in hindsight if I had my time again I would do things differently, but this is what we did when we were in a bad situation.

We were running a Business that was losing a truckload of money each week. We were tied to a very costly lease that we could not break because the building was owned by a Solicitor. It looked as though we were heading for bankruptcy, so we took a gamble.

The bank had previously given me approval for a certain amount of money some months before, which was based on a profit & loss that I had drawn up (it was a new business). Things didn't pan out as we had planned, but the bank did not know this. I asked the loans officer if this money was still available. It was! So........I got on a plane, flew interstate and bought two houses.

Now, at the time we thought "why not" we had nothing to lose, and everything to gain. The properties were both cashflow possitive, so there was no cost to us. We also sold out PPOR, put enough funds away to cover our losses for the two years we had to stay put (approx $2k per week), moved into the grimy cockroach infested unit on top of the business, and bought another IP which was planned to be our PPOR when we could finalise the business.

At this time, Hubby went back to paid employment while I looked after the business, with the help from our kids, and I worked part-time on weekends while he ran the business.

So, in saying all that, our situation was different, we were losing a heap of money but we worked out a way to both keep a roof over our heads, pay out the debts AND put a stop loss in place. If the bank had known our real situation at the time, well, they would certainly not have given us any money. We did not get any assistance from Centrelink except for the family allowance.

Maybe your friend should consider working a second job whilst at TAFE so that the imcome can still be there to service the debt.

 

[Rolf Latham]

Hi Skater

there is a big difference between the 2 situations.

One had a clear outcome with a defined path.

The data we have so far on the friend is that things are looking bad after a couple of poor months in business and we are reliant on Centrelink support to MAYBE imprve things by improving skill set. While this is a positive path I would not be able to convince myself or a lender that this will result in the right outcome.

Ta

rolf

 

[skater]

there is a big difference between the 2 situations.
.

Yeah, just messing with ya. Although I did say the situations were different.

So, in saying all that, our situation was different, we were losing a heap of money but we worked out a way to both keep a roof over our heads, pay out the debts AND put a stop loss in place. If the bank had known our real situation at the time, well, they would certainly not have given us any money. We did not get any assistance from Centrelink except for the family allowance.

The data we have so far on the friend is that things are looking bad after a couple of poor months in business and we are reliant on Centrelink support to MAYBE imprve things by improving skill set. While this is a positive path I would not be able to convince myself or a lender that this will result in the right outcome.

Which was why I suggested a second job. Even while at TAFE, the friend will have nights and weekends available to them. Plenty of time there to gain some additional income I would think.

Maybe your friend should consider working a second job whilst at TAFE so that the imcome can still be there to service the debt

 

[peaches]

I would have thought that under NCCP a broker would be in breach if he lodged an application and in 4 weeks same NCCP rules applies to lender.

Anyway a broker has duty of disclosure (as does client) if the loan went belly up the lender could pursue the broker for costs - and would most probably win.