Hi Vanessa,

My response might be too late but in any event I'll give you my thoughts on this issue. 

The first question can be broken down into two parts:

(A) The major issue is serviceability.  When you add up all their commitments which include the instalments to you, the part 9 agreement, car loans, visa bill etc. the amount should not be anymore than around 35% of their combined gross income.  If that is the case, then you know they have the ability to service the loan.  Personally, I have gone for less than 35% so that there is a buffer against interest rate increases.  I do not think the credit company will cancel their agreement as long as they are paying the debt back in accordance with their agreement.

( The other part of your due diligence I would be interested in is whether or not they declared the part 9 debt agreement to you, or did you only find that out when you obtained a copy of their credit history.  That will tell you whether or not they are straight with you and therefore whether you can rely on them to be frank with all issues that arise throughout the term of the contract.

The second question:

I have had people with bad credit and on pensions when they bought from me and 18 months later refinance with a normal bank.  The increased equity in the property and their good repayment history gave them the upper hand in their discussions with one of the Big 4.  I do not stop them from doing a refinance, although I could and can, as it promotes a win-win outcome to both parties. 

Kind regards
Mark