Applying for a loan can be both an onerous and a nail-biting experience process. Many think that they are powerless to impact the outcome because applications are assessed by computers. According to Louise Lucas of the Property Education Company, nothing could be further from the truth.
Here are Louise’s nine top tips to help you have a smoother experience and increase your chances of approval.
1. Provide The Full 100 Points Of Identification
Even if a driver’s license will suffice. By providing both your driver’s license, passport and even your medicare card you can positively impact your credit application score. If your passport has expired, it will still be accepted up to two years after expiry.
2. Keep Your Savings Account In The Black
Ensure your savings account, where your paychecks are deposited, always has a positive balance. Allowing your account to be overdrawn, even temporarily, can be viewed as poor financial management by lenders.
3. Keep Your Credit File Clean
Avoid excessive credit inquiries by not “bank shopping” or applying with multiple lenders. Too many credit applications within a short period can negatively impact your credit file and potentially lead to automatic rejection. Instead, work with a broker who can perform a soft credit check without affecting your file.
4. Maintain a Comprehensive List of Your Assets
Provide details of all your assets, including savings accounts, superannuation, investments, vehicles, and personal belongings. Presenting a comprehensive list of assets can reassure lenders of your financial stability.
5. Disclose All Liabilities
Failing to disclose any open lines of credit or outstanding debts can make you appear dishonest to lenders.
Be transparent and provide information about all your liabilities, even if they are rarely used.
6. Establish a Home Deposit Account
If you’re seeking a home loan, open a dedicated account labelled “home deposit” and consistently contribute to it without withdrawals. Lenders appreciate seeing genuine savings earmarked for a property purchase.
7. Consult Before Major Life Changes
Significant life events, such as changing jobs, becoming self-employed, or renting out your home, can impact your borrowing capacity. Consult with your lender or broker before making such changes to understand the potential effects on your loan application.
8. Consider Loan-to-Value Ratio
A lower loan-to-value ratio (LVR), where your loan amount is a smaller percentage of the property’s value, can qualify you for better interest rates. Discuss strategies with your lender or broker to optimize your LVR.
9. Promptly Provide Required Documents
Respond quickly when your lender or broker requests documents. Delays in providing necessary paperwork can cause frustration and potentially invalidate previously submitted documents due to expiration dates.
By following these tips, you can present a stronger loan application and increase your chances of securing favourable terms. Remember, your lender or broker is there to assist you, so don’t hesitate to ask questions and seek guidance throughout the process.
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