Can I get a home loan with a car loan or personal loan?
Short answer
Yes. Car and personal loans reduce your borrowing capacity rather than block approval. As a rule of thumb, every $100 a month of repayments reduces what you can borrow by roughly $15,000 to $18,000. Paying a small loan out before applying often buys back more capacity than the cash it costs you.
- Capacity cost
- ~$15k–$18k less borrowing per $100/month repayment
- Credit cards assessed on
- The limit (typically 3–3.8% per month), not the balance
- Best candidates to clear
- Small balances with high monthly repayments
- Evidence required
- Payout confirmation and account closure
Consumer debt is the single biggest lever most borrowers can pull in the three months before they apply — and the maths is unusually clear, because lenders assess the actual repayment rather than the balance.
The trade-off, in numbers
A $12,000 car loan with $450 a month of repayments costs you somewhere around $70,000 to $80,000 of borrowing capacity. Paying it out uses $12,000 of your deposit — which reduces your maximum purchase price by roughly that amount plus the leverage on it. For most borrowers, clearing the loan is the better trade; for a borrower who is deposit-constrained rather than income-constrained, it is the wrong move.
- Income-constrained (capacity is the ceiling): pay the debt out.
- Deposit-constrained (cash to complete is the ceiling): keep the cash, restructure the debt.
- Credit cards are special: reducing the limit costs nothing and immediately frees capacity.
- Never close accounts without payout letters — lenders require evidence the commitment is gone.
Consolidating debt into the home loan
Rolling consumer debt into a mortgage lowers the repayment dramatically because the term stretches to 30 years — which is exactly the risk. A $30,000 debt consolidated at 6% over 30 years costs far more in total interest than clearing it in four. It is the right move when it prevents default or frees genuine cash flow, and the wrong move when it simply resets a habit.
What to do in the 3 months before applying
- Reduce or close credit card limits you do not use.
- Clear small, high-repayment loans first — buy now pay later, then personal loans.
- Do not take on a new car loan or lease, including a novated lease, before settlement.
- Keep repayments on everything perfectly on time; a single arrears entry outweighs the balance.
How XLOANS helps with this scenario
We check the policy before an application is lodged, not after. That means confirming with the lender's own guidelines that your situation fits — tenure, income treatment, credit file, deposit source — so the enquiry on your file is one that has a genuine chance of approval.
Our service costs you $0. We are paid an ongoing commission by the lender for as long as your loan stays with them, which is why reviewing your loan later matters to us as much as settling it now.
Book a free 15-minute chat
Pick a time that suits you and an XLOANS broker will call to talk through your home loan options — no cost, no obligation.
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Frequently asked questions
This page is general information only and not financial advice. Lending criteria, rates and government schemes change — speak to an XLOANS broker for advice tailored to your situation. XLOANS is a Melbourne-based mortgage broking service.
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