Bad Credit Construction Loans: Building Loans for People with Bad Credit

Get a construction loan with bad credit

Having bad credit such as defaults, judgments, and writs listed on your credit file does not mean that you cannot get a construction loan.


This could be a great option for those looking to build their dream home but fall outside the lending guidelines of the standard banks and lenders due to bad credit issues and wouldn’t usually qualify for a construction loan. 

bad credit construction loan
low doc home loan accountant's letter

Yes, people with bad credit may be able to get a construction loan. But you will need to meet all the lender’s criteria.

You may be able to borrow up to 90% for full doc applicants and

80% for low doc applicants, of the fixed price and land value.


Fee capitalization up to the maximum loan to value ratio limits allowed.

Specialist lenders will accept applicants with:


    • An unlimited number of defaults, judgments, and writs up to $1,000 (paid or unpaid); or
    • Unlimited defaults, judgments and writs >$1,000 (paid or unpaid) listed >24 months.


Lenders will consider applicants one day after they have discharged from bankruptcy.

No, you will not require evidence of genuine savings including borrowed funds to complete for this construction loan. You can use a gift, bonus or recently obtained funds to cover the deposit.

Yes, both owner-occupier home construction loans and investment property construction loans are available even if you have a past credit issue.

Loan terms of up to 40 years are available for this construction loan.

Only a variable interest rate which is interest only (I/O) on balance of loan during the construction period.


The construction loan converts to home loan with principal and interest (P&I) repayments on completion of construction.

Building Contracts

Bad credit construction loans require copies of the following documents prior to the date of the first progress payment:


    • Copy of executed Fixed Price (inclusive of GST) building contract from a licensed builder (not owner builder) executed in standard HIA format;
    • Council approved plans and specifications; – Evidence of Construction All Risk Insurance (including public liability) from the builder with a Certificate of Currency showing Pepper Finance Corporation Limited as mortgagee;
    • A copy of the builder’s insurance under the Home Building Compensation Fund (previously Home Warranty Insurance) covering the subject property during the course of construction;
    • Certificate of registration of the builder; and
    • Builder’s bank details on their letterhead.


Progress Payments

    • Up to 6 drawdowns scheduled prior to settlement
    • Borrowers must use their full financial contribution at settlements i.e. at purchase of vacant land. This contribution is to be based on the loan to value ratio of the ‘As if Complete’ valuation
    • Requests must be in writing signed by all borrowers (Progress Payment Authority – PPA)
    • A copy of the builder’s invoice must accompany each PPA
    • A survey certificate is generally requested when the first progress payment is required
    • The WL partner manages the progress payment process including the payment of any progress inspections by the valuer
    • Progress payments are paid into the builder’s bank account via EFT – Valuer (who completed the initial ‘as if complete’ valuation) to complete progress inspections as required (up to 6 depending on the loan characteristics and construction costs) prior to the release of each drawdown
    • The cost of the progress inspections is at the borrower(s) expense


Final Payment

    • Valuer’s final progress inspection report is to advise current valuation figure and confirm all works have been completed as per plans and specifications
    • Prior to release of the final progress payment: Evidence of building insurance with the lender noted as first mortgagee, for an amount not less than replacement value as advised by the lender
    • A Certificate of Completion from council may be required – Copy of Occupancy Certificate for new homes only (not applicable for SA or WA)
self employed home loan

Other bad credit home loan types

Do you have a credit impairment but don’t fit the criteria above? Find out about other types of bad credit home loans.

Construction loans

Find out all about what you need to know about construction loans.

Owner builder loans

Find out all about what you need to know about owner builder construction loans.

Oak Laurel – Bad credit home loans made easy!

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