BORROWING POSITION · EAST MONEY GUIDE
How lenders look at your borrowing position
Borrowing capacity is shaped by more than income. Lenders consider how your earnings, expenses, debts, dependants and proposed loan work together under their assessment rules.
East Money · General information
Income needs to be usable, not only visible
Salary, overtime, bonuses, rent and business income may be treated differently between lenders. The amount shown on a document is not always the amount used in an assessment.
- Base income and employment status
- Variable income and the period over which it has been earned
- Rental income and lender allowances
- Business income, entities and supporting financial records
Existing limits can affect the result
Credit cards, personal loans, car finance, student debt and guarantees may reduce borrowing capacity. A lender may assess a credit-card limit rather than the current balance.
Living expenses need to be realistic
An assessment usually compares declared household spending with lender benchmarks. Accurate figures make the result more useful and reduce questions later in the application.
The assessment rate is higher than the loan rate
Lenders test whether repayments may remain manageable if rates rise. This serviceability buffer means an online repayment amount is not the same as an approved borrowing limit.
Capacity and comfort are different numbers
A lender may calculate a maximum, but your own limit should also allow for rates, maintenance, changes in income and ordinary life. A smaller loan can sometimes produce a stronger plan.
QUESTIONS PEOPLE OFTEN ASK
Useful points to clarify early.
Why does one lender calculate more than another?
Assessment rates, expense benchmarks and the treatment of income and commitments vary between lenders.
Does reducing a credit-card balance help?
The limit may matter more than the current balance. Closing or reducing a limit should be considered in the context of your cash flow and application plan.
Is an online borrowing calculator an approval?
No. It is an illustration and cannot account for every lender policy, document or property detail.
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