5 Things You Should Do Before Applying for a Loan

Make sure you meet the criteria.

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Regardless of what type of personal loan you’re interested in applying for, you need to make sure you meet the criteria to apply. In most cases, Australian banks require applicants to be at least 18 years old, hold an Australian or New Zealand citizenship or permanent residency, and live in Australia. Depending on the lender, you may also need to meet minimum income requirements, receive a regular income, and have a good credit rating.

Prepare all necessary documents.

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Your income affects your ability to make monthly payments on a loan, so you’ll need to provide proof of income to be approved. Each lender has unique policies regarding proof of income when applying for a loan.

Depending on the lender, payslips may or may not meet the standard for proof of income. In this case, you can provide other documents to prove your income, including a letter from your employer, a copy of your employment contract, tax returns, and bank statements. Additionally, if you’re self-employed, most lenders require two years of tax returns or a verification letter if your tax returns aren’t available.

Choose your type of loan.

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Most lenders offer two types of loans: fixed-rate and variable-rate. With fixed-rate loans, you can secure an interest rate and set repayments for the term of the loan. If you want to know exactly what you’ll owe each month and how much you’ll end up repaying in total, a fixed-rate loan might be the best option for you. Fixed-rate loans can also protect you if interest rates increase later on.

With a variable-rate loan, you’ll be able to take out a loan at a competitive rate and make additional payments without incurring any fees. Making early payments can reduce your interest rate by lowering your overall loan balance. In some cases, lenders will allow you to redraw available funds when needed.

Choose the terms of your loan.

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After deciding how much money you need to borrow and what type of loan you want to take out, think about the terms of your loan. Ask yourself how long you’ll need to pay off the loan, taking your monthly income and budget for loan repayments into account. Most lenders will allow you to choose terms between one and seven years for variable-rate and fixed-rate loans.

If you’re not sure what term is best for your financial situation, use this calculator to know your loan repayments. In addition to helping you figure out what your repayments are likely to be on your new month loan, the Mortgage Calculator can also calculate how much you’ll pay over the total term of your loan and let you compare different home rates to find the best value.

Hire an accountant.

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If you’re taking out a loan for the first time, the process can feel overwhelming and complicated. If you feel like you’re losing sight of budget and how much you’ll need to take out, an accountant can help you take back control and find the best loan options for your financial situation.

Before hiring an accountant, be sure to conduct a thorough background check using an information database like Go Look Up. Since you’re going to share your finances and sensitive personal information with your accountant, it’s important to make sure they’re trustworthy and reliable. Typing your accountant’s name into Go Look Up will reveal potential red flags, provide free criminal records, and give you peace of mind.

All in all, applying for a personal loan is simple and straightforward with the right research and preparation.