If you’re considering applying for a personal loan, it's essential to understand the eligibility requirements that lenders look for. In Australia, while different lenders may have slight variations in their requirements, there are several common factors they generally consider. Here’s a detailed look at the key points that affect your eligibility for a personal loan. 

What personal loan eligibility criteria will I have to meet?

There are several key points that will need to be covered when it comes to standard personal loan eligibility in Australia. While some of these may differ slightly between different lenders, they’ll largely apply across the board. The factors that affect your eligibility for a personal loan include:

Your age and residential status

First and foremost, the easiest qualification points to self-assess are your age and residential status. All applicants must be at least 18 years of age, providing a clear, black and white guideline.

Similarly, most lenders will also require you to be an Australian citizen or permanent resident and living in Australia at the time of applying. There are some lenders who can offer personal loans to temporary residents, but they’re more difficult to obtain as a general rule.

Your credit score and history

Most lenders will also enforce their own restrictions when it comes to the types of credit scores that they’re willing to work with for their personal loans. In these cases, you’ll be required to maintain a good credit score, which points to a trustworthiness when it comes to servicing your debts in the past.

As part of this, you’ll also be required to maintain a spotless record when it comes to defaults and bankruptcies in your past. Both of these are likely to have significantly negative impacts on your score, but lenders will want to steer clear of borrowers with a history of being unable to repay their debts.

Your income

Each lender will set a minimum income requirement as part of their qualification criteria. This is in place to function as the lowest income that you could earn and feasibly repay a personal loan. While this can vary from $22,000 to $26,000 p.a., your application may not be approved even if you earn well above this amount.

This is because lenders base their approvals on how comfortably you can afford to take on the loan you’re applying for. For instance, someone earning $30,000 p.a. applying for a $5,000 personal loan could be approved if they have enough disposable income, while someone earning double that salary applying for a $20,000 could be denied. Generally, loan repayments shouldn’t take up more than 30% of your disposable income.

Your employment

Similarly, lenders require borrowers to hold stable employment at the time of applying for their personal loan. This is because they want to guarantee that your income stream isn’t at risk of running dry during your loan’s repayments.

As such, guidelines are set in place for different types of employment. You can get approved with a full-time or permanent part-time job provided that you’re not under probation, while your casual employment must have been in place for at least six months prior to your application (with stable income). If you’re self-employed, you’re likely to need at least two years of trading under your belt to qualify for a personal loan.

What documents do I need as part of my application?

Part of the process of getting approved for your personal loan is producing the correct documents to couple your lender’s application form. These are requested to confirm that you’re who you say you are and that everything in your application is true and correct. The main documents to be gathered and included in your application are:

• Payslips: you’ll be required to supply your two most recent payslips. If self-employed, the two most recent years’ worth of tax returns will be requested.
• Employment contract: your lender may request a copy of your contract in certain circumstances.
• Bank statements: similarly, some lenders will ask for 90 days of bank statements alongside your payslips. These can be obtained by supplying your internet banking account information.
• Photo ID: your passport and/or driver’s licence will be required to verify your identity. Your passport can be current or expired within the last two years, while your licence must be current.
• Proof of address: your lender may request to see a recent utility bill to confirm your residential address.
• Liabilities: you’ll need to disclose any outstanding debts, such as other loans, that may impact your repayments.

How much can I borrow with a personal loan?

The amount you could borrow on a personal loan varies based on a number of factors, starting with the type of loan you choose. If you apply for an unsecured loan, you could borrow as much as $75,000 from a minimum of just $2,000. Meanwhile, secured personal loans, when you put down an asset such as a car as security, could provide you with access to loan amounts as high as $100,000 – though this is affected by the asset you use as collateral. For example, if you put up your car valued at $30,000 and asked for a $100,000 loan, you’re unlikely to be approved for the amount you’re asking for, even if you can afford to support the maximum unsecured loan amount. This is because, in the event that you default on your loan, your lender is likely to be out of pocket even when selling off your collateral.

However, these are simply the maximum amounts available to borrow. The actual amount you are approved for could be much lower depending on your borrowing power. Lenders assess your ability to repay the loan by looking at your financial circumstances to determine an amount that aligns with what they believe you can comfortably repay each month. The primary areas that are taken into consideration when processing your application are your credit history, your income and your expenses. Looking at your monthly expenses gives your lender an idea of your disposable income after all other costs, allowing them to assess your borrowing capacity more accurately.

How can I increase my chances of personal loan approval?

With so many boxes to tick, getting approved for a personal loan can feel daunting, but there are things you can do to boost your chances:

Apply within your means: perhaps the simplest way to ensure that you’re approved for your loan is to only apply for an amount you can afford to repay. You can get an idea of how much you can comfortably cover with our borrowing power calculator.

Boost your savings over time: growing your savings not only demonstrates to lenders that you are responsible with your money, but it also gives you something to fall back on if your circumstances change.

Pay off outstanding debts: lenders favour borrowers who have fewer existing financial obligations, so if you can repay or reduce your debts before you apply, you’re more likely to get the amount you need.

Provide personal loan security: secured loans provide a safety net for your lender, which means that they may be more willing to approve the amount and terms you’re looking for.

Enlist a co-borrower or guarantor: adding another name to your application might also boost your chances. If you opt for a joint personal loan or to use a guarantor, you may be eligible to borrow more than you could on your own or qualify for lower interest rates.

Compare your options: just because one lender won’t lend to you doesn't mean you can’t get one elsewhere. There are dozens of personal loan providers on the market, each with their own specific lending criteria, so it’s useful to compare a range to find a loan that suits your needs and circumstances and improve your chances of getting approved.