For many, affording large expenses such as a new car or a house is not possible without a loan.
If you are wanting to apply for a home loan or want to finance your new car, debt can reduce those chances of getting a yes from the lenders.
Find out how debt can affect finance applications and how to improve your chances of an approved application.
Debt effects on a loan application
Having basic debt such as credit card debt can affect your chances of receiving an approved loan application. When researching whether a customer is suitable for a loan the lender will look through their current income and debt history.
Even if you do not have any current debt, past debt and outstanding repayments will be reviewed when assessing a loan application. These reviews will give you a credit rating which is what lenders base their decision on your application on.
When applying for a loan when you have a bad credit rating, not only will your application be rejected but it will also make it more difficult to get future applications approved. There are ways to increase the possibility of an approved loan application.
Decrease limits or cancel credit cards completely
The limit on your credit card can assist in determining what amount you can borrow on this new loan. The higher the limit the lower the amount you would be able to borrow.
Decreasing a limit on your credit card or canceling it can help you achieve the loan you want.
Don’t skip anything on the application
Skipping areas on your application can ruin your chances of an approved loan in several ways. First, skipping a section on your application gives the lowest credit score on that section. If you fill out every section you could show a better credit score than if anything was left blank.
Also, you must make sure that you record all assets and debts. Be mindful that things like superannuation are considered an asset. It is a good idea to consult with a mortgage broker to make sure all your assets and debts are recorded correctly.
Consult with a finance broker
To make sure you receive the best result on your loan application it is best to consult with a mortgage broker. They can assist you in finding a good loan at a low cost and can also assist you in applying for the loan correctly.
They can also provide advice on whether the loan would likely be approved if applied for and what to do if it won’t be approved.