Personal Loan
An unsecured or secured loan for a fixed amount repaid over a set term with regular repayments.
In detail
Personal loans in Australia cover car purchases, debt consolidation, home improvements, and other personal uses. Lenders treat personal loan repayments as ongoing commitments for serviceability purposes. The repayment amount and remaining balance both flow into the calculation, reducing borrowing capacity.
Some personal loans are consolidated into a new home loan at the time of a refinance. This can free up serviceability because the combined repayment on a long term mortgage is lower than the personal loan instalments. Brokers should verify balances, repayments, and end dates carefully before assuming consolidation will resolve a serviceability issue.
Why it matters for brokers
An existing personal loan of $30,000 over three years can crush serviceability because the high monthly repayment flows through at full weight. Identifying consolidation opportunities early can turn a declined file into an approval.
Example in practice
A client with a $25,000 personal loan at $720 a month wants to buy a home. The broker models two scenarios: keeping the personal loan running, which caps borrowing at $480,000, or consolidating it into the new home loan, which lifts borrowing capacity to $540,000 and makes the deal work.
Related terms
Car Finance
A loan or lease arrangement used to finance the purchase of a motor vehicle.
Credit Card Limit
The maximum amount a credit card holder can spend on a card, whether or not the balance is drawn.
Debt to Income Ratio (DTI)
Total debt divided by gross annual income, used by lenders as a supplementary risk measure alongside serviceability.
Credit Report
A record of a borrower credit history held by Australian credit reporting bodies.
Ready to assess faster?
Assess documents for mortgages in minutes, not hours.