Before you finally lodge your loan application to your bank, there are a number of things you need to make certain and do to facilitate the speed of both your personal loan application process and getting approval.
Here are four tips to getting your loan application approved fast:
- Know what you need and meet the bank’s criteria
- Determine the amount you need
- Build a satisfactory credit and/or account history
- Show and strengthen your savings record
Know what you need and meet the bank’s criteria
You need to prepare necessary documents and other requirements and make sure you meet your lending bank’s criteria before you even commence your loan application.
These specific documents will be required to be present with your loan application depending on the financial institution you’re lodging your loan application to—but in general, most banks will require from you:
- Proof of income — recent payslips, financial statements and tax returns, tax notice of assessment issued by the Australian Taxation Office (ATO), gross salary and your net salary details, and other sources of income (shares, rental property, etc.), whichever applies
- Bank statements — account statements containing a summary of your financial activities and/or transactions occurring over a given length/period of time; will also include statements on your savings, loans, and/or credit cards you have with other financial institutions
- Personal identification — valid personal identification (ID) cards/documents containing your photo, which include passport, your driver’s licence or firearms licence, and proof of age card
- Address verification — examples are utility bills or copy of lease, containing statements or records of your rent payments including specific dates the rent covers
- Employment — employment information and your employer’s contact details
- Details on your liabilities — needed by your bank to run a credit check and determine your credit standing; may include details on your accounts payable, accrued wages, current portion of debt payable, deferred revenue, income taxes payable, and debts you need to repay in more than one year, whichever applies
Learn more about these requirements here.
In general, criteria set by most Australian banks for the approval of loan applications require that applicant(s):
- Must be of legal age—18 years old
- Must be an Australian citizen or hold a permanent residency status, or a New Zealand citizen
- Need to be living in Australia
- Need to meet minimum income requirements
- Need to be employed, receive regular income, or show proof of regular earnings when self-employed
- Must have good credit rating
- Must not be anywhere near or going through the process of bankruptcy
Knowing what you need also means you should determine the appropriate kind of personal loan to apply for. When people talk about personal loans, they almost always refer to the closed-end installment loans that are unsecured. Technically, however, there are various other kinds of personal loans which include auto loans, mortgages, credit cards, payday loans, etc. To identify the kind of personal loan most appropriate to you, evaluate your current situation and the reasons why you are planning to take out said loan from your bank.
Note that your bank or lending financial institution may offer you a secured loan option if they deem your credit isn’t high enough for prime interest rates or even quality for their standard personal loan. Sometimes, putting your assets—your car or home, for example—as collateral will also help you qualify for the loan. A caveat: these are secured personal loans, and if you proceed with it, you must know you can lose your property if you are unable to fulfill your payments/financial obligations to your lending bank.
Determine the amount you need
You are applying for a personal loan to assist you in your current financial situation, thus, it shouldn’t result in you having a long-term debt. Banks will also look into your income and your ability to repay debts. If your income is deemed insufficient to satisfy the required payments to your personal loan, you won’t be able to get approval.
That is why you need to be pragmatic and only determine the amount you will be able to repay. You may also negotiate with your bank or lending financial institution to extend the loan term, therefore reducing your loan repayments’ impact on your current and short-term cash flow.
Simply, apply for a loan you can realistically repay.
Build a satisfactory credit and/or account history
Credit rating is one of the most important factors your lending bank or financial institution will look into, to determine your eligibility/qualification for a personal loan and then its approval or rejection. You might think to pay your phone and electricity bills on time all the time doesn’t contribute to your credit score, but it does. Instances of missed repayments, other debt collection issues, and arrears will no doubt impact your credit standing.
What does this mean? It means efforts to getting your personal loan application approved actually start long before you even commence lodging your loan application. It starts with the little things, really: paying your bills on time, avoiding late debt repayments, and generally being financially responsible.
Bear in mind, too, that some of your numerous loan applications to or credit cards with other banks may also affect your credit standing and consequently your chances of getting your personal loan application approved. Again, being responsible with your finances and financial obligations are key to avoiding these complications.
Show and strengthen your savings record
Having a solid savings record also certainly helps you to get that fast loan approval. Strengthening your savings record is also a display of financial keenness and responsibility. If your savings records show you regularly save particular amounts and consistently—meaning weekly or monthly, it will also inform your lending bank or financial institution that you are capable to manage and attend to your required loan repayments.
Besides the above considerations, also make sure to avoid the following, as they are the most common reasons why personal loan applications get rejected:
- Poor credit history — there are, of course, varying degrees of “poor” credit history, but as much as you can, always make sure you are on the better side of the credit rating scores
- Insufficient and/or irregular income — no lender will approve your application if they deem your income will not be able to sustain your required loan repayments; banks and/or financial institutions have a set minimum income you need to meet in order to get your loan application approved
- Dubious loan application purpose(s) — the credibility of your reason why you’re lodging a loan application, and then the purpose(s) for such a loan, are all important and will be strictly investigated by your lending bank, so make sure they are purposeful and truthful
- Insufficient, inconsistent, and/or erroneous details in application
- Insufficient employment history and/or erroneous employment details
- Applicant has too many loans and financial responsibilities already
- Applicant’s secured assets are deemed to be of low value
Considering all the above requirements and your personal reality will help you prepare better and streamline your financial and debt repayment goals to both successfully lodge a personal loan application to your bank and then getting it approved fast. Again, due preparation and understanding your financial situation as well as your ability for debt repayment always help.
If still unsure how to proceed, ask for advice from a trusted lawyer or relevant professional with proven expertise on the subject matter.