What Debts Affect Borrowing Power the Most in Australia?
When applying for a home loan in Australia, your debt levels can dramatically increase or decrease your borrowing power. Even borrowers earning strong incomes in Sydney, Melbourne, Brisbane, Perth and Adelaide are shocked by how much certain debts reduce their loan amount — sometimes by $50,000, $100,000 or even $200,000+.
Banks assess your debts before anything else. The type of debt, the limit, the repayment amount and the way you use credit all impact how much you can borrow. This page explains exactly which debts affect borrowing capacity the most, why banks treat different debts differently, and how tools like Matcheroo AI help borrowers find lenders who are more flexible with their debt profile.
1. Credit Card Limits (The #1 Borrowing Power Killer in Australia)
Most borrowers assume banks assess their credit card balance.
They don’t.
Banks assess your limit, even if the card is empty.
Example:
A $10,000 limit reduces borrowing power by $20k–$40k.
A $20,000 limit reduces borrowing power by $50k–$90k.
Credit cards have the biggest negative impact on borrowing power nationwide.
2. Car Loans (Extremely High Impact)
Car loans are one of the most damaging debts to borrowing power because they come with a fixed monthly repayment.
Example:
A $600/month car loan can reduce borrowing power by $60k–$120k, depending on the bank.
This affects buyers heavily in:
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Sydney Western Suburbs
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Melbourne South-East
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Brisbane Outer Suburbs
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Perth Outer North
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Regional NSW & VIC
Banks treat car loans as long-term, non-negotiable commitments.
3. Personal Loans
Personal loans reduce borrowing power because they have:
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High interest rates
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High assessed repayments
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Long terms
Even a modest personal loan can significantly reduce borrowing capacity.
Example:
A $15,000 personal loan may reduce your borrowing power by $30k–$60k.
4. Buy Now, Pay Later (Afterpay, Zip, Klarna)
BNPL has become a major factor in Australian lending.
Banks treat BNPL as:
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Ongoing debt
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A sign of inconsistent spending
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A credit-risk red flag
Even small BNPL payments can reduce borrowing power and trigger manual reviews.
Borrowers in their 20s and 30s in major cities are most affected.
5. HECS / HELP Debt
HECS dramatically impacts borrowing capacity because banks must add a compulsory repayment to your assessed expenses.
A HECS debt of $20,000–$40,000 can reduce borrowing power by:
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$20k–$70k depending on the lender
Banks treat HECS differently, which is why borrowing power varies dramatically between lenders for university graduates.
6. Existing Home Loans or Investment Loans
Banks must add the following:
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Your current mortgage repayments
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Rate buffers
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Property expenses
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Negative gearing treatment (varies by lender)
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Rental income shading (70–90%)
Different lenders treat investment loans very differently, creating massive differences in borrowing capacity.
7. Overdrafts and Store Cards
Even if unused, overdrafts and store cards are assessed like credit cards:
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Full limit applied
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Fixed assumed repayment
A $2,000 store card can still reduce borrowing power by several thousand dollars.
8. Tax Debt or ATO Payment Plans
ATO debts often trigger:
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Manual credit reviews
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Additional documentation
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Lower borrowing capacity
Some lenders will not approve loans for borrowers with active ATO repayment plans.
9. Child Support or Family Court Obligations
Child support is assessed as:
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A monthly outgoing
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A reduction to your usable income
This can significantly impact borrowing power for parents in NSW, VIC and QLD.
Why Some Debts Affect Borrowing Power More Than Others
Banks assess debt based on:
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Repayment size
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Remaining term
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Credit risk
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Reliability of repayment
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Likelihood of continuing long-term
Debts with fixed, unavoidable payments (car loans, personal loans) hurt borrowing capacity most.
Debts with high limits (credit cards) also reduce borrowing power significantly, even when unused.
How Much Debts Reduce Borrowing Power (Examples)
1. Credit Card Limit: $15,000
Borrowing power ↓ $30k–$60k
2. Car Loan: $500/month
Borrowing power ↓ $60k–$100k
3. Personal Loan: $300/month
Borrowing power ↓ $30k–$60k
4. HECS Debt: $25,000
Borrowing power ↓ $20k–$50k
5. BNPL Usage
Borrowing power ↓ $5k–$25k
AND may trigger a credit assessment delay.
Lenders vary drastically — which is why borrowers often find they qualify for much more with a different bank.
How Matcheroo AI Helps Australians With Debt Borrow More
Matcheroo AI compares all major Australian banks and identifies:
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Which lenders are more flexible with credit card limits
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Which banks accept more of your income
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Which lenders treat HECS more favourably
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Which lenders are lenient with car loans or BNPL history
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Which banks have higher borrowing-capacity calculators
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Where your debt profile fits best
Borrowers often discover $50k–$180k more borrowing power with a lender better suited to their financial situation.
How to Increase Borrowing Power Fast (Debt Edition)
1. Reduce credit card limits immediately
Fastest way to increase borrowing power.
2. Pay off car loans or personal loans if possible
Huge impact on borrowing capacity.
3. Clear BNPL accounts
Improves credit behaviour instantly.
4. Consolidate high-interest debts
Can reduce assessed repayments.
5. Remove unused overdrafts and store cards
Hidden borrowing-power killers.
Summary: Debts That Affect Borrowing Power the Most in Australia
The debts that reduce borrowing power the most are:
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Credit card limits
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Car loans
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Personal loans
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HECS/HELP
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BNPL services
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Existing mortgages
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Overdrafts
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Child support
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ATO debts
Because every Australian bank treats debt differently, your borrowing power can vary massively between lenders. Matcheroo AI helps identify the banks that will assess your debt profile more favourably — often resulting in far higher borrowing power.
