Explainer: If you’ve got $5k spare, what should you kill first?
If you’ve got $5,000 spare and you’re trying to boost borrowing power, the first target is usually your credit card limit, not your personal loan.
Right now, the “average” unsecured personal loan is about $18k over just under 3 years at roughly 13.9% p.a., with repayments around $771/month. If you throw $5k at that loan or refinance the remaining balance over 7 years, your monthly repayment will drop and that definitely helps servicing – but it’s not always the biggest win.
Most banks shade credit cards at roughly 3% of the limit every month, even if the balance is $0. So a $5,000 card limit is usually treated as about $150/month in ongoing commitments. Closing or cutting that limit often gives more bang‑for‑buck in borrowing capacity than putting the same $5k into a personal loan repayment, especially if you’ve got multiple cards.
If you’re on roughly $70k–$90k with HECS, a personal/car loan and a couple of cards, the usual “maximise servicing” order is:
1.Reduce/close unused card limits.
2.Then look at paying down or refinancing the personal loan to stretch the term and lower the monthly repayment.
3.Only then think about extra HECS repayments, because from 2025–26 HECS only starts once your income is above $67k and it’s assessed differently by lenders anyway.
If you want, I can plug your income, HECS, card limits and personal loan into current lender calculators and show you exactly how much each $5,000 of card limit or loan repayment is costing you in borrowing power so you can pick the smartest place to use your $5k.
