A new generation of barristers is emerging – savvier, better equipped, and more informed about managing cash flow than their predecessors. Thanks to the abundance of online resources and financial tools, this shift is noteworthy. But despite these advantages, we’re still seeing many barristers trapped by an unfavourable mix of debts. This is more than just a financial headache; it’s holding them back from achieving big goals, like buying a family home. And honestly, given the unique advantages barristers have, this doesn’t have to be the case.
Let’s put this into perspective. Barristers in Victoria enjoy a unique financial advantage. They can borrow up to 90% of a property’s value without needing Lenders Mortgage Insurance (LMI). It’s an extraordinary benefit, provided your servicing requirements stack up. Yet, despite this, too many barristers find themselves hamstrung by unnecessary debt. Let’s talk about why that happens – and how to avoid it.
the reality of starting a practice
No one is pretending that starting a barrister’s practice is easy. Cash flow is unpredictable, building a client base takes time, and managing ATO payments often feels like a juggling act. Add in the complexity of separating personal and business finances, and it’s no wonder some barristers lean on short-term debts to fill the gaps. But here’s the thing: not all debt is created equal. Some debts can quietly sabotage your financial future, reducing your borrowing capacity and stifling your progress. Let’s break them down.
1. personal loans
Personal loans might seem like a quick fix, but they’re often a wolf in sheep’s clothing. With higher interest rates and short repayment terms, they’re costly and limiting. Even if the balance feels manageable, personal loans can have an outsized impact on your mortgage borrowing capacity. In short, they’re not worth the trade-off
2. credit card debt
Credit cards offer convenience, but they come with hidden costs especially when it comes to your borrowing power. Even if you’re not carrying a balance, a $20,000 credit card limit can reduce how much you can borrow by up to $200,000. That’s a big impact for something you might not be using. Lenders will always take credit card limits into account when assessing borrowing capacity. High limits can raise questions about whether the full amount is necessary. Reducing the limit or cancelling unused cards can be a simple way to improve your overall loan position.
3. car loans
A shiny new car might be tempting, but financing it with a car loan could cost you dearly. A $50,000 car loan can reduce your borrowing capacity by up to $300,000. And with loan terms typically running three to five years, this debt can hang over your head just when you need financial flexibility the most. If you must finance a car, consider paying it off quickly.
4. ATO debts
ATO debts are more than just a financial burden—they’re a red flag for lenders. With high interest rates and short repayment terms, these debts can quickly spiral out of control. More importantly, they signal poor credit quality to lenders, making it harder to secure loans when you need them most. Clearing these debts should be a top priority before applying for any major financing.
why this matters
Avoiding these debts isn’t just about improving your financial health – it’s about unlocking your potential. With a clear debt profile, you’ll have the flexibility to seize opportunities, grow your practice, and achieve your goals. Whether it’s securing the family home or building long-term wealth, the power is in your hands.
final thoughts
The financial advantages barristers enjoy are exceptional. But to fully capitalise on them, it’s crucial to avoid the pitfalls of suboptimal debt. By taking a strategic approach to your finances, you can set yourself up for success – both professionally and personally. After all, your focus should be on building your practice, not battling unnecessary financial burdens.
about the author
This article is written by James Kelada, a senior mortgage broker at Yarra Lane with over a decade of experience in lending. As a family man with a wife and two young children, James deeply understands the financial challenges families face. Known for his expertise and trusted by professionals such as barristers and doctors, James has built a strong reputation for delivering tailored advice and helping clients achieve their financial goals with confidence.
This article provides general information only and does not take into account your personal circumstances, financial situation, or needs. It is not intended to provide personal credit advice. For tailored advice suited to your situation, please contact our office or speak with a qualified mortgage broker. Yarra Lane Finance Pty Ltd trading as Yarra Lane Finance operates under its own Australian Credit Licence 392272.