Making yourself more attractive to your lender

When it comes to qualifying for finance, it is important to understand what lenders are looking for in assessing your loan application. This is not about getting a haircut or buying a new suit for a meeting with your bank manager, rather it is about understanding what lenders look for in qualifying loan applications.

Not all lenders use the same criteria nor the same “affordability calculator”, however irrespective of what loan you are looking for or which lender you are considering the following are some basic steps you can take to make your loan application more attractive to a potential lender:

Up to date financials

To get the best possible deal it is important to ensure that your financials are up to date. If you are PAYG, that means that you must be able to provide your lender copies of your recent payslips, Group Certificate and sometimes extracts of your bank statements or your credit card statements. If you are Self Employed, more documentation will be required including the past 2 tax returns, as well as possibly other financial information such as bank account statements, BAS statements, budgets etc. Some lenders will only want to see limited documentation while others want the lot. As a rule, the more documents you are able to offer a lender in support of your application, to evidence your income and obligations, the better are your chances of approval and a good deal.

Close unused credit cards

Many of us have “just in case” credit cards that we do not use. A potential lender will take into account all your credit cards including those that you do not use. In doing so you may find that they are unable to qualify you for the loan you wish to have. Closing as many credit cards as possible before making a loan application will greatly improve your affordability and therefore chances of approval.

Employment stability is important

Do not move between jobs or between industries if you are looking to apply for a loan, unless your new job is better paying, in same industry and you are not on probation. The worst thing that you can do is apply for a loan while between jobs or when you have just decided to set up a new business. Lenders main consideration is how will you  be able to afford to repay the loan you are seeking. Unfortunately as a rule lenders are far less optimistic about the businesses chances of success that are the business owners. This is especially true if you have gone into a new industry one that you do not have much experience in.

A strong deposit is helpful

If the loan is to purchase an asset such as a property, equipment or motor vehicles – the larger is your deposit the better are your chances of approval (assuming all else is in order).

Check your credit history

Having a clean credit history at the time of your loan application will make qualifying for finance much easier, giving the borrower a much broader choice of lenders. Individuals whose credit history is blemished may need to pay more for their loan and have a narrower choice of lenders.

Credit history is not always accurate. We always recommend for borrowers to get a copy of their credit report before lodging any applications for finance. If they find any errors or anomalies, these should be followed up to ensure that the report is updated and correctly reflects your credit history before applying for finance.





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