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Caveat loans

Can I get a caveat loan with bad credit or defaults?

Updated Sept 2026 · Reviewed by The Lienhouse team

Usually yes. A caveat loan is assessed on the equity in the property and the exit, so defaults, judgments and a poor credit score do not decide the outcome the way they do at a bank. They still affect the price and the LVR, and a few things remain hard stops: current bankruptcy, an insolvent company, or a title that cannot be dealt with.

Key takeaway
Bad credit rarely stops a caveat loan because the assessment is on equity and exit; it can lift the rate and lower the LVR, and bankruptcy or insolvency are still hard stops.

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A credit score measures how someone has handled unsecured promises to pay. A caveat loan is not an unsecured promise. It is a short loan against real property with a defined repayment event, and that changes which questions matter.

What carries the decision

Three things: how much equity sits behind the first mortgage, how saleable the property is, and how the loan gets repaid. A director with two telco defaults and a paid-late credit card, offering a commercial unit at 50% combined LVR with a contract of sale in hand, is a straightforward approval. A director with a perfect file and no exit is not.

What bad credit does change

  • Price. A messy file with a weak explanation prices higher than a clean one.
  • LVR. Lenders keep more margin, so expect a lower ceiling than the indicative 65%.
  • Questions. Every adverse entry needs a short, honest explanation. A business that hit a bad year, a dispute with a supplier, an ATO debt now being cleared - these are understood. Evasion is not.
  • First mortgage conduct. Arrears on the existing bank loan matter more than any credit score, because they signal that the first mortgagee may act.

The hard stops

A current bankrupt cannot give security over property that has vested in a trustee. A company in liquidation or administration cannot borrow in the ordinary way. A property subject to a court freezing order cannot be charged. And taking on new secured debt when the company is already insolvent raises director liability questions that need advice first.

The exit is where bad credit bites

If the plan is to refinance the caveat loan with a bank in three months, the same credit file the caveat lender looked past will be in front of the bank. Be realistic. Where the file will take time to repair, the better exit is a sale, incoming funds, or a longer private facility such as a second mortgage, not a bank refinance that will not happen. See what is an exit strategy.

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FAQ

Do caveat lenders run a credit check?

Most do, on the company and the directors. It is used to understand the story and spot undisclosed problems, not as a pass or fail score.

Will a caveat loan fix my credit file?

Not by itself. Paying out the defaults or the tax debt that damaged the file stops it getting worse, and a clean repayment history helps the later refinance to a mainstream lender.

Does a court judgment stop a caveat loan?

Not necessarily. If the loan pays the judgment out at settlement, it removes the risk of a writ over the property. An unpaid judgment left outstanding is a problem.

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Equity and an exit matter more than the file.

The amount, the asset and the timeframe. We’ll match you with a funder and email you their introduction. Reply to it and they’ll be in touch.

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