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Steps for Success in Securing a Loan

Jun 4, 2020 | Insights

We have compiled some useful tips for those who have trouble obtaining a loan.

The feeling of having your loan application rejected can be frustrating for many people. Nothing will ruin your day quite like having to pull out of a handshake deal because your finance was not approved. The good news is, there are several steps you can take now to improve your chances of securing a loan.


Review your spending

Lenders must ensure that a consumer loan will ‘not be unsuitable’ for the customer. That means that the lender must be satisfied that the proposed loan will meet your requirements and objectives, and that you have the ability to make your loan payments without substantial hardship. One of the ways to determine this is by assessing your living expenses. Often a loan is refused because of poor banking conduct..

“Some signs of poor banking conduct can be the number of days an account is overdrawn, no funds retention in the account or payday lender activity,” says Sharna McEwen, Direct Business Consultant at Finance One.

“If you were knocked back for a loan, then review your spending and manage your income and expenses so you’re living fairly comfortably within your means.”

Start by considering your income and all your fixed and discretionary expenses, and we mean ALL your expenses – that $3.50 cup of coffee every day might look like nothing but that adds up to $1,277.50 over the course of a year.


Reduce your debt

The next thing to do is to reduce your debt. If you have a bunch of outstanding debts, then the first thing you can do is to try and figure out what they are. Look at who you owe money to, how much you owe them and what the interest and repayments are.

After you understand your debts, it is time to manage and reduce them. Of course, you don’t have to eliminate all your debts before applying for a loan. However, if you are refused a loan because of too many debts, then make sure you get rid of as many debts as possible and not take on any new debts before applying again.

“When we receive an application with heaps of buy now pay later or payday lender activity, it may indicate that the customer is in some sort of financial difficulty,” says Sharna.


Manage your cash flow

The next tip is to better manage your income. If your general living expenses are too high, this can have a knock-on effect on your loan application. Even if you have no debt and are always up-to-date with your bills, you can still have a loan application rejected if you spend your income too quickly or frivolously.

Decrease your discretionary spending by reducing spending on luxury, fashion and recreational items, reducing the number of times you go for nights out to the clubs, bars, pubs and movies, cancelling any memberships you don’t need or use – such as gym memberships, streaming services and subscription boxes – and eat less takeaway and more home-cooked meals.

Now you might be thinking to yourself: “I’ll just withdraw all my money out of the account when I’m paid. That way they won’t be able to see what I’m spending my money on!” However, Sharna has a word of caution for those thinking of trying this.

“Large ATM withdrawals are usually an indication of poor fund-retention and, depending on where they are made, could also be a sign of a gambling habit,” says Sharna.

The aim is to reduce your discretionary spending to build up cash reserves and demonstrate good spending habits. Once you’ve established this pattern of behaviour, apply for your loan again.


Start saving

One of the best things you can do to increase your chances of a successful loan application is to show evidence of savings. Although savings aren’t necessary when assessing your loan, it will help when you apply. One benefit of showing a good savings record is that you demonstrate you can make regular deposits, which lenders may infer as the ability to regularly meet your repayments. It also provides a buffer when it comes to repaying your loan.

“Savings are always a good idea as they show us that the applicant is managing their funds well,” Sharna says.

“Savings can also strengthen the application when we submit it to our credit analysts because it shows that the applicant has the ability to provide a deposit.”

If you recently had a loan application refused, don’t despair, it’s not the end of the world. Find out why your loan application was refused and take active steps to remedy the issues raised. Review your income and expenses, reduce your debt, and start contributing to a savings account. This way, in three to six months’ time, you should be able to apply again with the hope of a more favourable outcome.

One last tip, each time you apply for a loan with a lender, an enquiry will be made on your credit file and this may affect your credit score.

Review your spending; reduce your current debt; manage your cashflow; and start saving – and you will be ready to apply for your loan for a new car; home; or dream holiday before you know it!


The information above is of a general nature only and does not consider your personal objectives, financial situation or particular needs. You should consider seeking independent legal, financial, taxation or other advice to check how the information relates to your particular circumstances. We do not accept responsibility for any loss arising from the use of, or reliance on, the information.

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Makala Elliott

Makala is the Marketing Manager at Finance One. She has worked in the Finance and Lending industry for over 10 years, gathering a wealth of experience. She is passionate about helping Australians get back on track with their finances by passing on her knowledge.

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