How do I apply for a personal loan?

Personal loans are offered either with fixed or variable interest rates. A fixed interest rate will not change for the duration of the loan term, while a variable interest rate may change during the loan term.

Be aware of any potential fees and charges before taking on a loan. For example, a pre-payment fee may apply if you pay off the loan early, or there may be fees and charges if you default on a secured loan repossession and sale of your security asset if you default on a secured loan.

Once you’ve chosen a lender, having these documents on hand when you apply for your personal loan can help speed up the loan approval process.

If you’re self-employed, you may also want to consider any seasonal downtime or lean periods that may affect your ability to repay the personal loan. Check out our guide to self-employed loans to learn more.

It’s important to do your research before applying for loan instead of than ‘shopping around’ rather than applying for many personal loans in the hopes of getting approved. This is because every time you submit an application to a lender, this may result in a credit enquiry on your credit file. Multiple enquiries in a short period of time can negatively impact your credit score – which may result in lenders perceiving you as a higher risk.

Why was my personal loan application declined?

If your personal loan application has been declined, you didn’t meet the lender’s credit criteria. Why? Here are some reasons that may apply:

Credit Report

Your credit report is a record of your credit history including loans you’ve applied for and taken out and defaults and judgements.

Credit score

Your credit score is a number that’s calculated by a credit reporting body or the credit provide that you have applied to. It uses a formula that considers credit repayment history information, how much debt you have and how you compare to other borrowers.

It’s calculated by a credit reporting bureau. Your credit score helps show lenders the strengths and weaknesses of information in your credit report.

Large amounts of debt and previous difficulty repaying things like credit cards and car and home loans r will impact your credit score. Lenders will use this credit score and their own credit criteria to assist with their assessment on whether to approve credit, how much to lend and depending on the lender, the interest rate.

Checking your credit report

If you thought you had good a good credit history but were denied a personal loan, you should check your credit report as there may have been an error in your credit report. Things like having the same debt listed more than once, incorrect credit enquiries or repayment history on your credit report could all have an impact on your overall credit rating.

To ensure your credit report information is accurate, you can obtain a free copy of your credit report every three months and can request to have it correct if you think the information is incorrect. Credit reporting agencies in Australia include Equifax, Illion and Experian.

Even if all the data is correct, reviewing your report could give you a clearer view of your financial situation.

Capacity to service the loan

When making an assessment, lenders need to make sure a loan meets your requirements and objectives and that you can afford to repay the loan without substantial hardship. This is called responsible lending – the lender must make enquiries and verify your financial situation including your income, liabilities and living expenses. If it is assessed that you cannot repay the loan that has been applied for without substantial hardship, the lender must decline the loan