Salt & Lime sees a rise in cash-strapped homebuyers seeking help to cover ballooning debt

Lender Salt & Lime is experiencing more borrowers reaching for debt consolidation in the wake of a pandemic spending splurge, as once easy credit turns expensive.

Salt & Lime offers customers a discount on loans if they complete learning modules.

The number of Australians seeking extra funds to cover mortgage arrears is on the rise, according to a Sydney-based non bank lender.

Salt & Lime, which offers debt consolidation services for customers, says it’s aware of borrowers attempting to secure funds to cover their home loan repayments or refinance hefty debts which were accumulated on consumer lending platforms during the pandemic.

Salt & Lime co-founder Will Kiln said it was concerning to see a significant number of Australians struggling with unsecured debts, and noted that many borrowers approaching the lender were facing repayments per year averaging 60 per cent of the borrowed sum.

Mr Kiln said many of these borrowers were being hit with the maximum allowable interest on credit products, as well as having to pay fees for missing repayments.

He said Salt & Lime allowed borrowers to roll together existing unsecured debts to a 20 per cent interest rate, and they could reduce the cost of borrowing further to 14.5 per cent if they complete financial education modules.

By contrast, the average standard variable bank mortgage rate for an owner occupier is around 6 per cent, while personal loans can range from around 5 to 30 per cent.

“The vast majority of our customers have been carrying (their debts) for some time; they’re in what we would call the death spiral, which means they’re going from short-term loan to short-term loan,” he said.

Mr Kiln said many customers turned to short-term finance and non-bank lenders as they found themselves increasingly locked out of the mainstream financial system due to their poor credit and repayment history.

Salt & Lime co-founder Will Kiln. Picture Supplied

The Council of Financial Regulators in December raised concerns about a pick-up in arrears by non-bank lenders, but noted they were low by historical standards.

Salt & Lime said it has a write-off rate on its almost $39m in loans of below 1 per cent, which was below the non-bank lender industry standard.

It said average customers were carrying $13,000 in unsecured debts when they sought help.

Mr Kiln said the debt burden many were carrying was “indicative of general consumer and cost-of-living stress”.

Latest data from the Australian Bureau of Statistics revealed the Consumer Price Index rose 4.3 per cent in the year to November, reflecting a slowdown in price growth from 4.9 per cent in October.

The inflation data was the lowest since January 2022 and well down on the peak of 9.4 per cent recorded in December 2022.

Mr Kiln said Salt & Lime had not been immune to the rising cost of living, and a rapid run-up in borrowing costs was not being passed on to borrowers.

Salt & Lime is funded through a wholesale facility from i-Partners, pegged to the bank bill swap rate.

Mr Kiln said the facility which started off at $500,000 had ballooned to $54m as more borrowers sought to refinance costly consumer finance.

The loan book currently stands at $39m, and the lender is profitable and cash positive.

He said Salt & Lime’s business model was proving a winner with other funders; several of the big banks were offering to extend separate wholesale funding lines to bankroll a further expansion in the loan book.

Mr Kiln, who co-founded Salt and Lime after a career in banking, said the lender was benefiting from many of its borrowers paying off their debts.

“About 15 per cent of our applications come to us organically, word of mouth or a recommendation,” he said. “A lot of the customers are consolidating and then moving on.”

Salt & Lime has attracted the backing of a number of high-net-wealth investors, including i-Partners, and investment strategist Mark Sherwood.