There is a lot that changed in the finance industry in 2019, as a result – it is now more important than ever to plan ahead to ensure a successful finance application in 2020. Preparation is the key! In the current market lenders are reviewing applications with a higher level of scrutiny, taking a much more intimate look into your finances and how you manage them. Let’s explore what they are looking at and how you can be prepared.
Undisclosed Debt
Lenders will conduct a check of your credit history when assessing your loan application. Your credit check will include information on all your existing debts, including debt that you have applied for and not proceeded with. Multiple applications for debt are viewed negatively by lenders and may impact your loan application.
Action: It is crucial that you disclose all debt in your finance application. Be honest with where you are at and we can help you manage it.
Store Cards
If you have any open store card accounts such as AfterPay or ZipPay, they will negatively affect your serviceability. They are another form of debt regardless of whether you are currently using them or not.
Action: Do you really need them? Consider a savings plan for your purchases instead and close them.
Credit Cards
Credit cards are a handy tool when used responsibly however lenders will assess your borrowing capacity based on the maximum amount of credit you have available on all credit cards. Yes! – even if you pay them off every month and on time!
Action: Consider closing some cards (if you have more than one) or, consolidating into one low rate card with a low limit or, close them completely and use a Visa or Mastercard debit card.
Recurring Expenses
Have you done a recent review of your discretionary monthly expenses? What are you spending on things like Netflix, gym memberships, personal trainer, music lessons…? The bank will look at these when assessing your serviceability.
Action: Can you reduce or cancel any of your discretionary monthly expenses? Make sure you are making all of your monthly payments on time.
Bonuses and Allowances
Do you receive bonuses or allowances as part of your income? Are you reliant on this income to afford your loan? You will need evidence of regular payment of these bonuses or allowances for a lender to consider including them as part of your income. Most lenders will also only include a percentage of this income, keep in mind that lenders now require a longer time frame of evidence.
Action: Ensure you have evidence that your bonuses or allowances are received consistently, the earlier that you prepare, the more you will understand what you need and be able to plan ahead.
Commissions
Is your income heavily dependent on commissions? Do they vary greatly from month to month? Lenders will look at the consistency of these commissions when assessing your net income for serviceability.
Action: If you have just started a new job with a different commission structure, consider getting in touch with a broker so you understand how the commission income is calculated sooner, this will help you have a smoother process when applying for finance.
Living expenses under the microscope!
In summary, your living expenses are no longer about submitting a round figure, the lenders will look at them in detail to make their assessment.
Action: Put yourself in a position where you are proud of the way you manage your finances and your road to finance success in 2020 can be easy.
Ahhh! So much to think about! Yes, we hear you! There’s a lot to consider and we prepared this article to bring the little things that can make the big difference, to your attention so you can plan ahead and be prepared.
By submitting an application direct to a lender without having your finances airtight, you may well end up with an unsuccessful credit application on your credit report which you will be stuck with for 5 years! This is not the situation we want to see anyone in however it does happen then our brokers help people get back on track and they realise there is a better way that can save a huge amount of time and headaches.
Our brokers are here to help you and simply make life easy so that no matter what your situation, we can guide you every step of the way. We know what the lenders are looking for and we know how to help you make good decisions, we have tools and strategies to support you in generating finance success in 2020. It doesn’t have to be hard, it can be EASY – that’s what we’re here for.
At Launch Finance we love building financial futures with our clients. If you’d like to meet with one of our expert brokers to review your finances, you can book an obligation free consult here or give us a call on (08) 9367 4222.