While a prospective borrower can get a mortgage despite debt, it certainly can make things more challenging. Here’s a quick look at how you can help your clients with analysing their debt and what guidance you can offer them to clear it.

Credit Score

Your client’s credit score determines their creditworthiness as a borrower. It is usually based on three factors that include the following:

  • Existing debt – credit card and pending bill payments
  • How much credit they’ve applied for
  • Punctuality on repayments like mortgage, utilities, rent etc.

The lower their score, the harder it is to secure a loan.

 Repayment capability

Lenders try to establish how easy it is for your client to make repayments based on their:

  • Income
  • Existing debt
  • Living expenses

The higher their income and lower their debt and living expenses, the better your client’s chances of a successful loan application.

Steps you can advise clients to take

Clearing debt is the first step towards ensuring a better credit score and improving your client’s repayment capability. Here are some easy steps they can consider.

  • Outstanding Debt: Get a clear picture of how much they owe by creating a comprehensive list of all bills and repayments that are due and overdue.
  • Repayment Targets: It is advisable to pay as much as possible. This way, they can pay off debt faster and significantly reduce the amount of interest. Otherwise, an outstanding amount will most certainly snowball to unmanageable proportions quite soon.
  • Debt Accumulation: Advise them to not apply for any more credit in the form of credit cards or other similar offerings.
  • Budget Adherence: they should minimise living expenses as much as possible till they clear existing debt. The internet is full of saving hacks and actionable advice. Do a little research and work with them on a plan that suits their circumstances.
  • Payment Reminders: Encourage them to set reminders to ensure no late repayments. Late payments get recorded in your client’s credit file and impact their credit score. Choose from a range of free and reliable online reminder apps that can help you with making timely payments.
  • Lender Selection: There are lenders that offer home loans despite bad credit and inadequate documentation in form of ‘Near Prime Loans’ and ‘Alt doc’ loan options.

Success with chipping away at their debt will motivate your clients to keep going. Encourage them to religiously track expenses. Exercising financial discipline is not very hard. It’s all being persistent and setting achievable goals.

In addition to some great rates for ‘Near Prime’ and ‘Alt doc’ home loans, Resi also offers a straightforward application process with great turnaround times. To reach us for a discussion, reach us HERE.