Let’s see (I’m a credit adviser circa November 2010)

The choice is to;

Facilitate (through a client needs analysis)a secured split loan facility (mortgage) at the governing rates of the day or offer a PL at 18% p.a.for the same sum & loan purpose.

Perhaps we can consolidate a number of high rate (say 18% p.a.) unsecured Credit Cards, Aussie Personal loans and a small cash out advance for the immediate purpose at hand, into a separate split loan mortgage facility at say 6.25% p.a.

Then we ensure (through a DDR) that we treat the split loan component as a 5 year amortising loan, making sure we don’t link any cards to it either.

Any additional household disposable capital available can be used to reduce this loan split balance further, thus reducing the time required to pay off this ‘non dedectable’ debt under 5 years.

The split will still have redraw of course (for enexpected future unforseen capital requirements) so in terms of product flexibility, it remains a vastly preferable product than a standard PL.

And all this at 6.25% p.a., not at 18% p.a.

It’d be interesting to see what ASIC would say if an Aussie broker decided to flog their ‘branded’ PL when in fact other, more viable, appropriate and cost effective solutions were obviously at hand.

I think ASIC call it……appropriate product advice.

Thanks to John for highlighting the anachronistic thinking of yesterdays product flogger.

Paying for a higher interest product to encourage people to pay them off faster! Just use the lower interest mortgage loan product and simply pay off the same amount as if it was the personal loan. This is just the worst kind of spin.

Money is a commodity, you want to buy it at the cheapest rate you can, first last and always. The problem of paying off less and hence building up a huge debt is a discipline problem and that is not solved by paying more but by teaching clients to pay off the unproductive debt as fast as they possibly can or not taking any on in the first place.