Debt Recycling
- Stable employment or business income.
- Tolerance for increased risk and debt levels.
- Long term investment focus.
The implementation process for debt recycling is:
- Consolidate debts (credit cards, car loans, etc.) into the home loan.
- Use equity in the family home as security for an investment purpose loan.
- Use the borrowed money to invest in an income producing asset (shares, property or managed funds)
- Use the investment income, plus tax savings from the geared investment, to pay off non-deductible debt on the home loan.
- Increase the investment- purpose loan by the same amount as has been paid off the non-deductible debt on the home loan.
- Repeat this process each year until the investment-purpose loan entirely replaces the non-deductible loan.
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