1. Understand the qualifying criteria
Before you start the process, knowing whether you qualify (or can qualify) for a personal loan and how you can use a personal loan to make sure it’s the right choice can really help.
This also gives a realistic picture of the information you’ll need to provide when you do decide it’s time to apply.
To qualify for a personal loan, you’ll need to:
- Be at least 18 years old
- Live in Australia
- Hold an Australian or New Zealand citizenship, Australian permanent residency or an eligible visa with enough time remaining to pay off the personal loan
- Meet income requirements to make the repayments
- Be employed or receive a regular, provable income
- Not be going through the process of bankruptcy
What can you use a personal loan for?
- Home renovations / repairs
- Home furnishings
- Holidays
- Medical bills
- Education
- Vehicles (eg. a classic car or restoration project)
- Vehicle repairs
- Life events (eg. a wedding and/or honeymoon)
- Solar energy
- Debt consolidation
If in doubt, give our team of experts a call to discuss your options.
All lenders need to know what the funds are for as there are some reasons where you will not be eligible for a personal loan, for example sending funds offshore or using the funds for gambling.
2. Understand the different types of personal loans
There are a few different personal loan options available. Here’s the difference so you can decide what’s best for you.
Below are the common types of personal loans that you’ll likely encounter. Make sure that you know the difference.
Secured personal loans
These loans are “secured” to an asset which means you put up something you own (eg. a vehicle) that a lender (eg. a bank) can seize if you can’t meet the repayments.
These loans are considered less risky for the lender and can attract lower interest rates.
Note: Although having something “seized” sounds scary, it’s a last resort. Lenders usually give ample time to catch up on late repayments, plus discuss alternative options and come to other arrangements – afterall, they are businesses and want to offer good customer service.
Unsecured personal loans
As the name suggests, nothing you own is put up as collateral (secured).
These loans are considered more risky for the lender and can attract higher interest rates but might suit someone who doesn’t have something or doesn’t want to provide anything to secure.
Payday loans
These are fast cash loans under $2,000 and are designed to cover expenses until a person’s next pay comes through.
Payday loans often attract very high interest rates (sometimes up to 48% p.a.) with high fees, often paid upfront too.
These fast cash loans can deter lenders from approving larger finance applications in the future so make sure you do your research and understand the fees and impact a payday loan might have on your future plans.
Note: We do not offer payday loans
3. Know where you stand
Do you know your credit score? If not, that’s absolutely okay, a lot of people don’t keep constant track of their credit score but thankfully it’s a really easy thing to check.
Your credit rating score which is detailed in your credit report. If you’re over 18 and have ever even applied for credit (eg. a phone plan), you should have a credit report.
Knowing your credit score and checking the accuracy of the information on file is a really important step in understanding where you stand and what kind of loan is achievable for you.
These reports are generated by reporting agencies and display information such as;
- Personal information
- Address history
- Loan repayment history
- Enquiries (details of formal loan applications)
- Late repayments
- Defaults
- Your credit score
A credit score rates a person’s ability to repay a future loan and is typically based on a maximum of 1,200 (the higher, the better).
Lenders look at your credit report to get an idea of how much they’ll lend to you – a lower credit score can mean a higher interest rate and/or lower chance of approval.
It’s easy to get your credit score, just by searching ‘Free Credit Score’.
Hint: you can also correct any mistakes you might find on your report.
4. Get your ducks in a row
Now that you understand where you stand financially, it’s time to get stuck into the nitty gritty with some steps you can take to help secure a great loan.
Before you start applying there are a few things our loan experts recommend looking at to help improve your chances of a fast approval.
Build good banking conduct
Most lenders will want to see your bank statements as part of the application process so now is a great time to make sure you are keeping a good account history.
Managing your finances properly helps show lenders that you are ready to take on a new expense and that you’ve budgeted well for the repayments.
In the months leading up to getting a personal loan, our loan experts recommend:
- Avoid gambling
- Minimise large cash withdrawals
- Label all transfers correctly
- Don’t go into the negatives (overdrawn)
- Ensure you pay all bills on time
Show a good savings record
Another great way to show lenders that you are financially ready to take on a new expense is to add to your savings regularly.
In the lead up to your application, if you can show that you set aside money each paycycle, it helps lenders see that you are likely to be able to manage regular loan repayments.
Don’t worry! You don’t have to put those savings forward as a deposit towards your purchase if you don’t want to, it’s just a way to make sure your ability to repay the loan is easy to see.
Employment / income
Most lenders will request your two most recent payslips or other documentation to check your income. The more stable, the better, so make sure you keep records.
If your employer or source of income doesn’t provide you with regular documentation, it might be worth investigating as these are important when applying for a personal loan.
Probation
If you’re on probation, waiting until you’re on a regular contract can show your employment is even more secure. Have a chat with your employer if you’re not sure.
Centrelink
Some eligible forms of Centrelink payments are also acceptable to use as proof of income when applying for a personal loan. Note that JobKeeper and Youth Allowance are not eligible to use for loan repayments.
Address
You’ll need to be able to show your fixed address to apply for a personal loan (eg. with a utilities bill or similar). If you’ve recently moved, you might need to provide your previous address too.
Tip: if you don’t have anything showing your address, you could organise correspondence from your bank to go to your new address or arrange to have a phone plan that might be attached to parents or a partner put in your name. Furthermore, ID (eg. a driver’s licence) typically shows your address on it and if it’s an old address, you might need to inform your local government.
5. Do not apply with multiple lenders
Did you know that each time you formally apply for finance (credit), it’s recorded on your credit report? That’s regardless of the outcome too.
For example, a phone plan or a car loan – you apply through a lender, it’s on your credit report.
Keep in mind that these “enquiries” can lower your credit score, such as personal loans, car loans and even phone plans so be careful in the lead up to your application.
We are all about finding the right loan for you, so we absolutely understand the desire to ‘shop around’.
While it’s great to do your research, make sure you are not applying with multiple lenders as it will impact your credit score and your ability to get a loan.
Working with experts like us, we can help you look at multiple lenders, including the big banks, to find the most competitive rate and the highest likelihood of fast and easy approval – without formally applying and leaving enquiries on your credit report.
Mistakes
Some people apply directly to several banks to see who offers the lowest interest rates per their circumstances, only to go back to the bank with the lowest rates and realise they no longer qualify. This is because their multiple enquiries have reduced their credit score.
6. Know your numbers
Maybe not the most exciting part of your personal loan journey, but it’s really important to know your numbers and feel confident that you are applying for the right amount.
Budgeting for your personal loan will help you have your numbers ready for your application as the lender will be looking at the same thing to get an idea of your expenses and lifestyle.
Running your numbers:
- List all of your expenses (bills / shopping / regular payments) per pay cycle
- Don’t forget things like car registration, petrol, insurance and other expenses that might be yearly
- Add everything up and deduct that amount from your weekly / fortnightly / monthly pay cycle
The remaining amount is the funds the lender will look at but keep in mind that if you have, for example, $100 remaining per pay cycle, you won’t be able to use all $100 for your loan repayment as you’ll want a buffer for things that pop up.
If things aren’t quite lining up when you are running your numbers, it might be worth thinking about reducing the loan amount or extending the loan term to reduce the impact of the repayments each pay cycle.
Tips for getting a personal loan in summary
There are so many different ways you can make a personal loan work for you so whether you are dreaming of that perfect wedding, an amazing holiday or even solving a problem like repairs or bills, there’s an option tailored to you.
Now that we’ve provided you with our top tips for getting a personal loan, you’re well armed to get that fast approval with a great rate.
If you think you are ready to get started, you can get a quote today with Positive Lending Solutions.
Or if you need more information you can chat with our personal loan experts or you can find our personal loan FAQs here.
Bonus tips:
What exactly CAN’T you use a personal loan for?
You can not take out a personal loan with the sole intention of sending funds offshore. If you’re planning to buy a vehicle located in another country, you can use a personal loan to purchase a car from an Australian car importer.
Gambling is also a no. You can’t take out a personal loan with the intention of gambling.
How much can I borrow?
It depends on your profile. Things like your income, credit history and living expenses all have a bearing on the amount you can borrow, as well as determining your interest rate.
Find out a loan amount tailored to your circumstance with a quick quote and our expert Lending manager will be in touch with everything you need to know.
