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Line Of Credit Or a Top Up Loan?

Jun 3, 2016Finance

Lines of credit can be very useful; however, you need to be careful regarding an evergreen set-up in which no repayments are needed and the interest is added on to the loan. Years ago that was a sound strategy for increasing your tax deductible debt. This has been a very contentious subject with the ATO (and many court rulings), and my advice would be to stay away from such a strategy or ensure you seek expert advice from a tax expert that may require a private ruling to ensure you stay on the right side if you are seeking to capitalise the interest. If you are looking to access equity from your home, it is never a good idea to top up the loan for investment purposes. The reason is that you are mixing together investment debt with personal debt. As an example, if you had an $80,000 home loan and you took out a $20,000 investment loan, your total single loan amount would be $100,000. This would equate to a ratio of 80% personal debt to 20% investment debt. The challenge is that if you wanted to make accelerated repayments onto your home loan you would simultaneously be wiping out your investment debt. This would mean that every time you made a $1,000 principal repayment (not taking into account the interest portion charged) you would be – staying with the example of 80/20 – reducing your home loan by $ 800 but also wiping out $ 200 of the investment debt. Why is this bad? Well, if you had a home loan for $100,000 and an investment loan...

Do you know your credit score?

May 22, 2016Finance

This article highlights the importance of your credit score when applying for a loan. Your credit score is based on an algorithm embedded in the lender software that automatically assesses your creditworthiness before your loan application is even picked up by a credit assessor. Lenders never disclose how they assess your credit score (not even to brokers) but they tend to like employment and residential stability, clear credit files, more assets than liabilities and low numbers of credit enquiries on your credit file. In a nutshell, your predictability is good when applying for a loan with many lenders. When applying for loans or credit, a question commonly asked by Australian consumers and businesses alike is, “What is my credit score?” In Australia, we have access to credit scores (or ratings), as well as credit files that both you – and lenders – can access. It is important to understand what your credit file is and what kinds of information it contains You will have a credit file if you have applied, within the past five years, for a credit card, loan or even a mobile phone plan. Your credit file, which is also known as a credit report, can be one of your most valuable assets. It records certain dealings with credit providers and contains a history of overdue debt, defaults and credit applications. Lenders, or credit providers, make enquiries to credit bureaus, such as Veda (who hold a record of such enquiries on your credit file). They can then access your credit file to assess your suitability for a loan or line of credit. They will do this against their own...

Applying for a Loan

Oct 20, 2014Home Buyers

This article lists some basic documentation requirements all lenders will require when you apply for a loan. These include proof of your identity and verification of your income, expenses, assets and liabilities. Applying for a loan...
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