How to Get Your Loan Application Approved in a Tough Lending Environment

Interest rates are recovering after a rough few years, but lenders are still under pressure from regulators to ensure borrowers can truly afford their repayments. That means banks are scrutinising applications as much as ever - and it’s often the little details that can make or break your approval.

Those little fun expenses do indeed add up!

I’ve recently been working with clients whose application was on a knife-edge due to several different complexities. Despite strong incomes, their declared living expenses didn’t match what was really going out of their accounts. They’d declared they spent around $6,000/month, but when we reviewed their statements, their real spending was over $10,000/month. Yes, we acknowledged the brief holiday and Christmas expenses - but we were still way above $6k a month. The upshot? We had to put the application on hold until while they adjust their spending.

Here’s what you need to know to avoid ending up in the same position, and how to give your application the best chance of approval in today’s lending climate:

Know Your Real Living Expenses

Banks compare your declared expenses against your actual spending patterns (using 3–6 months of transaction history). If your statements show higher spending than you declare, we have to use the higher figure - which can dramatically reduce how much you can borrow.

•  Review your bank statements yourself before applying. Categorise spending honestly and think about what’s essential and what could be trimmed. Do you really need that chicken shredder you (I) saw in Kmart the other day? Probably not. All those $25 purchases really add up! Limit the little treats for the few months before applying.

  
  

Consider any Short-Term Debts Before Applying

Personal loans, car leases, or Buy Now Pay Later debts can heavily impact your borrowing power. Lenders include the repayments in your serviceability calculations, often reducing your maximum loan size by tens or even hundreds of thousands of dollars.

• A $10,000 credit card limit will reduce your borrowing capacity way more than $10k. You don't have to close it prior to applying - but be prepared the lender may ask you to reduce your limit or cancel it prior to a full approval.

• You'd be amazed at how many people genuinely forget about things like a Latitude credit card they accepted years ago, then it sits idle. Whether applying for a loan or not - it's good to check every so often what's sitting on your credit file!

  
  

Be Honest and Consistent About Income

One of the fastest ways to derail your application is inconsistencies across your documents. Declaring different income figures on your payslips, tax returns, and the application can trigger a decline or lengthy reassessment.

• Ensure the documents you supply are in line with what's requested - no more, no less!

  
  

Avoid Big Transactions Before Applying

Large one-off purchases or cash transfers can look like ongoing commitments or undisclosed debts to lenders’ credit teams. This can raise red flags and cause delays.

• Hold off on big expenses or moving large sums until your loan is formally approved - but know what's ahead.

  
  

Work With a Broker Who Understands the Fine Print

Every lender has different policies on living expenses, debts, and income types. An experienced broker can match you with lenders that are more flexible about things like commission income, self-employed earnings, or family commitments.

The Bottom Line

In today’s environment, what you spend matters just as much as what you earn. Being proactive about your expenses and working with the right broker can make the difference between an approval...or disappointment.

If you’d like a confidential review of your borrowing capacity, I’d be happy to help you get loan ready.