A common debt reducer is a lender assessment method that may reduce the liability counted against one applicant when another person is demonstrably responsible for repayments. It does not remove legal liability for the debt.
Policy and terminology differ between lenders. Before relying on the treatment, a broker should collect repayment evidence and compare it with debt consolidation or other ways to improve borrowing capacity.
Eliminate hours of manual data crunching and focus on building relationships with new clients.
Track My Trail makes it easy for brokers to keep track of lost & gained trail, discover clients who have paid off big chunks of their loans, and identify your most profitable clients.
Get Track My Trail for free today – no credit card required.
What Is a Common Debt Reducer?
The method recognises evidence that another borrower or joint account holder services a liability. The lender decides what portion, if any, can be excluded or reduced in serviceability.
Understanding the Common Debt Reducer
A declaration alone may not be enough. The lender can request statements showing who makes repayments and may require a consistent history. The liability remains visible on the applicant’s credit file.
Types of Debts Where Common Debt Reducers Are Applied
Joint Home Loans
A lender may consider who occupies the property, owns the security and makes the payments. Separation arrangements need clear legal and financial evidence.
Business Loans
Where a business services a liability, check company statements and the applicant’s obligations. The method may differ from treatment of personal loans or a business loan.
Exploring the Benefits of Common Debt Reducers
Correct treatment may produce a more accurate serviceability result. It does not repair a poor credit score or release the applicant from repayment risk.
Borrowing Capacity Effect
A mortgage broker should test the scenario under current policy before the application process. Compare the result, loan terms and interest rates with lenders that assess the full debt.
