Assessors Tips - Capacity to Repay

It is a HomeStart requirement for applicants to demonstrate a capacity to service the proposed HomeStart loan over a 3-month period. As a result, reasonable steps must be taken to determine whether a proposed loan is ‘not unsuitable’, that it is unlikely to cause applicants substantial financial hardship, and to determine the applicants’ ability to comply with the terms and conditions of the loan contract.

To meet the Capacity to Repay eligibility criteria, rent and/or savings must be equal to or greater than the HomeStart monthly loan per month for the preceding 3 months.

An example of an acceptable demonstration:

Applicants are applying for a loan with a $2,000 monthly repayment. They currently pay $1,500 monthly as rent, and have a demonstrated saving history of $500 per month for the preceding 3 months.

If the savings amount is less than $500 for any of the preceding 3 months, the customer would not meet the Capacity to Repay criteria. However, if a customer can identify lifestyle changes across either savings or expenses to meet the shortfall, they may meet the Capacity to Repay eligibility criteria. For example; changes to discretionary spend such as the cancellation of Netflix or Spotify could help to meet the shortfall.

Lifestyle changes to meet a shortfall in Capacity to Repay must be declared by the applicant and the expenditure/s identified in recent bank statements AND must be supported with commentary in your submission notes.

For further questions around capacity to repay, contact your Business Development Specialist.