Struggling to get a bad debt or bad credit home loan? It’s stressful when a bank turns you down. But it doesn’t mean your dream of home ownership is over.
A bad debt usually means missed bills, a defaulted loan, or arrears in collections. Bad credit is broader and covers your overall credit history – late payments, multiple loans, or even bankruptcy.
In this guide, we use the terms interchangeably because both can affect your chances of getting a home loan approval in NZ.
Some banks decline right away if they see these issues. Even so, there are flexible ways forward with the right structure, lender choice and plan.
Bad Debt or Bad Credit Home Loans in NZ: Your Options
Even with past defaults or collections, approval may still be achievable. We’ll assess your situation, explore non bank options or consolidation, and map a pathway back to a main bank.
How Lenders View Debt
Banks follow strict lending rules. Even a small missed payment can raise red flags. When assessing your application, they look closely at:
- Debt vs income – they want to see whether you can service the mortgage and other debts.
- Card/Loan limits and balances – limits count toward affordability.
- Repayment history – do you have arrears, dishonours and defaults
- Income type and stability.
If the numbers don’t stack up under bank models, banks may decline your loan. However, “declined” does not mean “impossible”. It usually means we may need to look at a different pathway or restructure debts before re-applying.
If a bank has declined you, see Bank Said No for the safest next steps before re-applying.
Your Next Steps If You Have Bad Credit
Many Kiwis think getting approved for a home loan with bad credit is impossible. With the right structure and lenders, it can be achieved. Past debts may also feel like a financial trap. But, they don’t have to end your dream. The best pathway depends on your situation:
- Non Bank Lending – they do case-by-case assessment and provide faster decisions (while we build a path back to a main bank).
- Debt Consolidation – simplify multiple debts into one repayment to improve cash flow and serviceability.
- Credit repair and planning – we’ll help you tidy up your file, manage repayments and set milestones to refinance to a main bank.
Non Bank Lending – A Flexible Path Forward
Some borrowers use non bank lenders as a stepping-stone. These lenders often take a more flexible approach than banks. Read more about how this works in our Non Bank Lending services page.
Debt Consolidation – Managing Debt More Effectively
Consolidating multiple debts into one structured loan can lower the rate you pay on short-term debt and simplify your budget, improving approval odds. Learn more about our Debt Consolidation services.
Tips to Improve Chances of Approval
- Prioritise high-interest card balances first – interest compounds quickly.
- Make all payments on time to strengthen recent conduct – late or missed payments hurt approval chances.
- Manage student loan commitments – banks model monthly obligations alongside your mortgage.
- Avoid new credit applications and reduce unused card limits since limits impact affordability (even at $0 balance)
Once we put the right structure in place, you’ll likely have one repayment and a single rate to manage, reducing the risk of future missed payments and helping your credit recover.
How a Mortgage Broker Helps You with Credit Challenges
As brokers, we know which lenders are open to working with clients who’ve had credit issues. Here is how we support you. We:
- Review your credit file without unnecessary applications.
- Identify suitable lenders (non bank or specialist lenders) with realistic approval odds.
- Model debt consolidation to improve your position.
- Map a clear plan to rebuild your credit and return to a main bank.
At Platinum Mortgages, our focus is turning “no” into a pathway forward, no matter your situation.
Stuck In Debt in NZ? We Can Help
Bad debts don’t have to hold you back. With the right guidance there are always options. That may mean working with a non bank lender, consolidating debt, or building a plan to repair your credit. Even if you’ve been declined before, a home loan could still be within reach. With the right strategy, you can move forward with confidence. Get in touch for a free, no obligation chat. Let’s find the path that works best for you.