The first step in figuring out how to get a loan is determining your credit score. It is the main metric lenders consider when evaluating your credit application.

Your credit score is calculated based on the data in your credit report – a document that contains exhaustive information about your credit history.

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What is the eligibility criteria for a loan?


The eligibility criteria for the different loan types vary between lenders, but the general requirements remain standard:

  • You must be a citizen, a permanent resident, or a valid visa holder in Australia.
  • The minimum age to qualify for a loan is 18.
  • There are lenders that require a minimum annual income ranging from $15,000 to $30,000.

It is important to note that lenders cannot discriminate against borrowers on the basis of their age, provided they can demonstrate their capacity to repay a loan. However, older borrowers may have to meet additional requirements due to the responsible lending criteria. This regulation mandates lenders to perform thorough borrower assessments to guard against financial setbacks during the loan period.

You should also know that some lenders limit the types of property they accept as collateral for a secured loan. That means residential homes in urban areas are generally preferred because they are easy to sell in case you default on the loan.


What do lenders review?


If you plan to take out an unsecured loan, lenders are most concerned with your recurring income and expenditure. Therefore, establishing a stable employment history and high disposable income can significantly boost your chances of approval.

Keep in mind that all of these factors appear on your credit report and contribute to your credit score. You can consider your score to reflect how trustworthy you are as a borrower. The higher your credit score, the better your chances of getting loan approval. 

If you have a string of negative marks on your credit report, you may have trouble figuring out how to get a loan. These marks may include a history of defaults that resulted in your credit score plummeting. However, everything is not lost! Australia has no shortage of alternative lenders that specialise in bad credit loans.

These lenders are willing to hear you out regarding the problems that caused your credit score to decline. You just have to demonstrate that your financial situation has improved and that you are now in a position to obtain a loan. If you still have no idea about the shape of your credit score, we can help!

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What does the loan amount depend on?


The amount of money you can borrow from a lender depends on several factors, including your credit score, credit history, debt-to-income ratio, and financial profile. It also depends on what type of loan you take out: secured or unsecured. 

A secured loan requires you to put up an asset – perhaps a car or a house – as collateral to secure the loan. The amount you can borrow from a secured loan mostly depends on the value of the property put up as collateral. In the unlikely event that you default on a secured loan, the lender may repossess the collateral and sell it to recover the cost. 

Meanwhile, an unsecured loan requires no collateral. Instead, the amount you can borrow is based solely on your borrowing power in light of your credit score and credit report. To compensate for the risk associated with unsecured loans, lenders tend to offer smaller loan amounts and higher interest rates than secured loans.

Australian lenders usually have borrowing power calculators on their official websites. You can input your credit score and other information into these calculators to determine how much you can potentially borrow. You can also use these calculators to estimate how much you may incur in weekly, fortnightly, or monthly repayments.


How to get a loan?


The first thing you should do is gather all the documents needed to submit a loan application, including valid identification and proof of income. It is also a good idea to prepare a list of your current assets and liabilities. A lender may even request an exhaustive list of your monthly expenses to determine your disposable income.

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Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.