Personal loan approval is one of the final steps in getting finance. Before you submit an application, make sure you’ve done everything you can to improve your application and make it as simple as possible for a lender to approve.
To avoid having your loan application declined, here are a few things you can do to improve your chances of approval.
First, you’ll want to make sure you meet the basic qualifying criteria for finance in New Zealand:
If you meet the above criteria, you’ll select a loan to apply for, and then submit an application to a lender. Once you’ve submitted your application, the lender will assess your loan request and the documentation provided to demonstrate your capacity to repay the loan amount.
The best chance you have of getting approved for a loan is to prove your ability to repay the full loan amount, which lenders often do by looking at your income, stability in income frequency and type of employment, and length of time in employment.
Other factors, such as your credit score and ability to provide collateral on the loan, may influence their decision as well.
Unfortunately there’s no magic solution to guarantee loan approval in New Zealand. The good news is that there are multiple factors taken into account by lenders, which means that if one aspect of your application is lacking, you can strengthen it in other ways.
Here are some of the simplest ways to improve your application and increase your chance of having a personal loan approved by a lender:
First, make sure your essential documents are accurate. Lenders require personal identification and accurate income statements to approve your loan and assess your ability to repay the loan amount.
Lenders will use your income documents to assess your borrowing capacity and how much you can comfortably afford to repay on a regular basis. Before you apply, make sure you use a personal loan repayment calculator to figure out how repayments will fit into your existing budget. Lenders will find it easier to approve a loan that you can easily repay.
Your credit score is a number calculated on your financial history. It takes into account all your payments and missed payments, credit applications, debts, and other financial behaviour to create your current credit score. A good credit score shows consistency in responsible financial behaviour to a lender, which is important for both getting your loan approved, and getting a competitive rate from your lender.
Just like your credit score, a savings account is another way to demonstrate stability in how you handle your finances. Making regular deposits to your savings account shows a lender that you have emergency finances if required, but that you also don’t spend every dollar your earn. This also translates to confidence in your ability to meet regular, ongoing repayments to the lender.
Credit cards and overdrafts might be common for many New Zealanders, but lenders still view these as existing potential debts, even if you’re not at your limit. Most lenders will ask you to include existing loans or credit access on a loan application, and reducing the limits on these beforehand decreases the chance of you missing or struggling to make repayments in the future.
Lenders look at your employment history and time in employment as strong markers for income consistency. If you’ve been employed for less than 12 months, you may need to provide further details of your employment or contact details for your employer so the lender can contact them to verify your employment status.