How to Get a Higher Chance of Approval

By Angela Monroe - June 30, 2020

How to Get a Higher Chance of Approval

A loan approval process can be a nailbiter. Many things affect the outcome – from lender and credit history to loan reason and employment. Fortunately, there are things that all applicants can do to get a higher chance of approval.

Check out these tips to increase your chances of a loan approval…

Banking Conduct

ATM withdraw

This is one of the simplest and easiest to start with for a loan approval. In most cases, lenders (financial institutions) look at 90 days of bank statement history. They naturally want to see ‘clean banking conduct’ – but what does that mean?

Gambling: Lenders don’t like to see excessive gambling on bank statements. This is evident with online poker or lottery purchases, betting on sports or cash withdrawals, especially in certain locations. Avoid gambling in the lead up to getting a loan.

Cash withdrawals: To show a clean bank statement, try to pay for things by card. This will leave clear records rather than mysterious cash purchases. For example, $200 spent at a supermarket and petrol station looks better than a $200 cash withdrawal.

Account clearing: This means withdrawing all of (of most of) your income as soon as you get paid. Lenders get worried as it may show uncertainty with cashflow or inability to allow for direct debit loan repayments. Avoid taking out more money from your account than you have to.

Good banking conduct really helps with a loan approval.

Existing Loans

woman smiling with phone and card

Make sure you’re up to date with any current loans you may have. These other loans are evident on your credit file and bank statements. Also evident are any missed payments. Naturally, lenders fear missed payments on other loans you may have. They think along the lines of: ‘the applicant didn’t repay their last loan, so why would they repay us?’.

If you’re behind in any money you owe, talk to your lender to make sure you can get up to date as soon as possible. They often provide solutions to help people struggling

Payday Loans

scrunched up paper and notepad

Payday loans are small, short term loans. They are usually $2000 or less and have huge interest rates, sometimes up to 50%, plus large fees on top! These small loans are available online and have an easy application process. They are designed for emergency situations, such as crucial car repairs.

Lenders view payday loans negatively because they indicate an applicant struggling with their finances and in need of emergency assistance. Avoid any payday loans in the months leading up to applying for a loan. Furthermore, as the loan is ‘short term’, the repayments are extremely high which reduces your capacity to repay another loan.

The big banks look at payday lenders as the bottom rung of the finance industry, often taking advantage of low income families.


Mercedes line up

Owning assets increases the chances of a loan approval. Things like cars, trailers, caravans and of course, houses really help. This shows you have the ability to save money and make a big purchase as well as proof that you were able to repay a loan in the past.

Assets can also be used as collateral or ‘security’. This means you secure the loan to your asset – a car for example. You sign a document giving permission for the lender to take the car if you can’t or won’t pay. It works as a safety net and therefore increases the chance of loan approval.


Man in suit fixing tie

Having regular money coming in is, of course, a must to repay a loan. We all like to see a large paycheck every week – lenders are the same. Stability further increases the chance of approval. Here are some points:

Type of employment: Lenders like to see stable income, so full-time work is favourable. Permanent part time or long-term part time is also a good thing as it shows regular income. Casual employment, especially for less than 3 months, is tough as lenders worry it might not last.

Probation: Someone on probation in a new job is considered less stable. This is because as per most employment contracts, new employees can lose their jobs. To increase your chances of a loan approval, it’s better to wait until after probation.

Industry Continuity: This may apply to casual workers, sole traders or contractors. If your income fluctuates or you regularly change employers, it’s better to have been in the same industry for longer periods. For example, an electrician who’s been working as such for 10 years but for numerous employers still appears stable. On the other hand, someone who’s just started their first ever job in a coffee shop may struggle for a loan approval.


hands joined for help

For a loan approval, Centrelink payments can sometimes help. Carer’s Pension for example, is usually considered a regular source of income, as is the Disability Support Pension. In most cases, lenders allow this for loan repayments.

Youth Allowance and NewStart can’t repay loans. This is because they are considered for ‘essential’ needs like food and rent, not for loan repayments. NewStart can be used if it backs up your income but not as someone’s sole income.

If you’re receiving Centrelink, check on MyGov to make sure your income can be used for loan repayments. You may need to contact Centrelink to be sure.

Loan Reason

'be reasonable' neon sign

This one sometimes gets overlooked. Lenders always want to know what their money is being used for. It’s easier to get a loan approval for a car or home repairs than simply ‘personal reasons’. Make sure your reason for a loan is legitimate and makes sense. If you’re buying a car, make sure to choose one that’s easy to get a loan against. 

End of the Day

people fist pumping

Following the above tips will dramatically increase your chances of getting a loan. Furthermore, using a broker makes sense. Brokers have the ability to match clients to lenders based on their circumstances. This means you’ll be able to avoid enquiries on your credit file which reduces the score. You’ll also get better rates as brokers know how to get applications across the line.

Imagine someone asks you to lend them a large amount of money. You’d want to know why and how and when they’ll pay you back. You’d be more inclined to lend your money to someone with solid income and a good reputation – lenders think the same way.

If you think you’ve got bad credit, there are ways to improve your interest rate

Angela Monroe
Angela Monroe is the Community Manager at The Positive Group, specialising in giving people the information that they need when they need it, and putting you on the path to a fair financial future. She has 8 years of experience in helping Australians find the right finance solutions, and regularly contributes articles to empower Australians with the knowledge they need to become financially healthy.


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