Banks won’t help refinance debts: Liberty

Banks are turning away home loan customers with high personal debt, according to non-conforming lender Liberty Financial.

Liberty says it has seen a big increase in the number of people getting into financial difficulty because, as consumer debt levels blow out, banks are unwilling to take on the risk of someone with six or more debts.

Even long-term customers seeking to set up a line-of-credit to access the equity they have in their homes are having trouble securing cash to repay their credit and store card debts, Liberty says.

Consolidating high-interest card debts into one home equity loan at a much lower interest rate can be a sensible strategy to get personal finances under control – for those who can borrow against their home or an investment property. Credit cards are up to 18 per cent and store cards up to 23 per cent compared to home loans rates up to 6.5 per cent.

Reserve Bank figures show credit card debt has reached an all-time high of $22.37 billion with the average card debt is now $2321 and the average card limit $6664. Last year, Liberty says it experienced a 100 per cent jump in the number of customers with more than six credit card debts compared to 2001.

“Just because someone has accumulated debts on six or more credit cards or personal loans, does not make them a bad credit risk,” says Liberty's managing director Sherman Ma. “All many people need is a helping hand to get their debts under control and consolidated into one, cheaper loan,” Ma said.