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.
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.
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.
Which 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 to increase the likelihood of personal loan approval
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. Borrowers are only eligible to repay amounts that their lender believes they can comfortably manage across their loan term. As such, you can boost your chances of approval by simply sticking to a loan with repayments that you can demonstrably afford. You can calculate your personal loan eligibility for your desired loan amount with our calculator.