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How banks calculate your current debts

How banks calculate your current debts

Most people realise that their current debts play a part in their ability to borrow money. Your current amount of debt is especially important if you’re applying for a home loan.

While you might be aware of this, what you might not know, is how banks actually calculate your debt. Many people are also surprised by what banks count as debts.

What counts as a debt?

Lenders can differ in what they count as a debt, but most are fairly similar. Car loans, home loans, and of course personal loans, all count as part of your total debt amount.

While these may seem obvious, there are a few others people forget about.  For example, many people fail to take their HECS debts into account. Others may not realise that small Centerlink debts incurred due to simple things as changing benefits, also count.

Afterpay, Zippay, and other interest free, buy now, pay later accounts, may also be counted towards your total debt amount. Even when the amount in question is only a few hundred dollars or less, lenders may require these accounts to be paid out and closed.

banks calculate debts credit card

What about credit cards, with no balance owing?

Many people have one or more credit cards kept for emergencies or rainy days that have no balance owing. A good credit history may have allowed them to get a substantial credit limit on these cards. But what many people don’t realise is that even with a spotless repayment history and a $0.00 balance owing, lenders are likely to calculate your credit card debit as your maximum limit.


For example, imagine you have two credit cards, each with a $10,000.00 limit, but $0.00 owing. Many lenders calculate this as a $20,000.00 debt, despite you not owning a cent!

What should I do about my debts if I want a home loan?

At Bee Finance Savvy, we provide customers with up front, obligation free consultations. As part of this service, we often have in depth discussions with customers about their current debts – both those they know of, and those they may have forgotten about. We can help you, tallying up the debts lenders will count. Additionally we can let you know which you should pay out or close, prior to applying. Sometimes improving your borrowing capacity can be as simple as reducing your credit card limits. Other situations can be a bit more complex. But have no fear, we’ll help you navigate them with ease.

To find out how your current debts may affect your ability to get a home loan, take advantage of our free consultations and speak with our friendly broker Desiree.

If you’d like to learn a bit more about Bee Finance Savvy from some of our previous customers, why not take a moment or two to read our WOMO reviews: https://www.wordofmouth.com.au/reviews/bee-finance-savvy-miranda

You may also enjoy – https://beefinancesavvy.com.au/gift-deposit-home-loan/

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