How do you get approved for a personal loan?

To get approved for a personal loan, applicants must meet ASIC Consumer Credit eligibility requirements and lender criteria including credit score and finances. Loans to individuals for any purpose fall under the Consumer Credit market and lenders offering this type of credit must adhere to ASIC regulations. Getting approval for credit involves satisfying all the requirements under the law plus the requirements of the lender for the type of finance being requested.

While the ASIC requirements apply across the market, lender eligibility requirements and approval guidelines can vary with different credit products and lenders. For example, different guidelines can apply to Secured Loans for cars, motorbikes, boats and caravans compared with Unsecured Personal Loans for other purposes such as travel.

Lenders will have their own guidelines in regard to the minimum credit score and income level for approval. They also have loan limits on certain credit products. The amount being requested for the finance will also have an impact on approval. Lenders look at the loan-to-value ratio when approving secured loan applications. This is how much is borrowed compared with the value of the goods being used as collateral. Lenders also determine the borrowing power or capacity for that individual when assessing applications. Where the amount requested is above that capacity, the application will likely not be approved. This is particularly relevant with unsecured loans where no collateral is required.       

Before submitting a finance application, applicants may benefit from checking their eligibility and the requirements for the credit product that they are considering.

Who is eligible to get approved for a personal loan?

Under the ASIC Consumer Credit Laws, persons must be 18 years or older to be eligible to apply for credit and be an Australian citizen. If not an Australian citizen, individuals must have permanent residency status or approved visa.

Individuals will need to have employment or other income stream.

Documents Required to Get Approved for a Personal Loan

Applicants will be required to provide the lender with a range of documents pertaining to their identity, employment, place of residence, income and expenditure. These include tax returns, payslips, bank statements and the standard forms of photographic proof of identity.

Expenses will need to be detailed – rent, utilities, regular weekly costs, loan payments and credit card details. The limit on credit cards is requested as this is assessed by lenders as a potential debt. Details of assets – cash, savings, property and goods of value, should be provided.

Individuals that are self-employed will need to provide financials such as tax returns going back several years with the Notice of Assessment from the Australian Taxation Office.

Credit Scores Required for Personal Loan Approval

Credit scores are integral to getting finance approval and for being offered the best rates. Individual lenders will have the minimum score that they will accept for different credit products. Individuals do not need to submit their credit report with their application. Lenders will access the report and history when approval by the applicant is given.

Applicants with good scores will receive better rates and may be approved for higher loan limits. The application may also be approved more quickly.

Options if You Can’t Get Approved for a Personal Loan

Individuals having trouble getting their application approved can consider a number of options, depending on the reason for the rejection. Ask the lender for the rejection reason so you have a starting point to consider your options.

If the reason is credit score, head over to Moneysmart and review the ways suggested to potentially fix any errors on the credit report. Paying off other loans may improve the personal balance sheet and the credit score.

Consider requesting a lower credit amount. The lender may consider you do not have the income level to meet the repayments on the amount requested.

Using a guarantor may be an option for some individuals. This involves getting another person who is approved by the lender to guarantee your loan. That means, they will pay off the loan should you be unable to do so. Guarantors are widely used by younger loan applicants who have not yet established their credit history and/or have lower income levels.

An obvious move when an application is rejected is simply to apply to another lender. STOP! Before you do that, know that multiple applications for the same loan can have a negative effect on the individual’s credit score. The solution to covering many lenders and avoiding damage to the credit rating is to use a finance broker such as Jade. We cover off on our large lender selection to find the most suitable lender, most suitable credit product and best rates without impacting the individual’s credit score.

How We Help with Personal Loan Approvals

We assist individuals to secure both secured and unsecured personal loans by handling the entire process on their behalf. We select the right lender, advise the most appropriate credit product, and deal with all lender contacts including processing the application.

For personal service to get approved for a personal loan for a wide range of purposes, connect with Jade Finance online or by phone. 

DISCLAIMER: NO LIABILITY IS ACCEPTED IF ERRORS OR MISREPRESENTATIONS ARE FOUND IN THIS ARTICLE. THE ARTICLE IS PREPARED AND PRESENTED FOR GENERAL INFORMATIVE PURPOSES AND IS NOT INTENDED TO BE THE SOLE SOURCE OF INFORMATION FOR MAKING FINANCIAL DECISIONS. THOSE REQUIRING GUIDANCE AND ADVICE SHOULD CONSULT A FINANCIAL ADVISOR.