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5 tips for increasing your borrowing power

5 tips for increasing your borrowing power

When it comes to borrowing money to buy a home, meet the cost of renovations or for any other purpose, there are a few steps that may help you increase your borrowing capacity and make your application more attractive to a lender.  

We’ve compiled some useful tips that could boost your borrowing power and help you get the loan you’re after. 

Reduce the amount you currently owe

In the eyes of a lender, an applicant who has an extensive amount of debt can pose a more serious risk to them. Before you make your loan application, work to reduce your outstanding loan balance(s) as much as possible to ensure that your overall repayments will be manageable after your new loan is approved.

Pay all your bills and debts on time

    Lenders take consistency in paying bills on time quite seriously. So, don’t underestimate the importance of meeting a payment deadline for even the most inconspicuous of bills. 

    Thankfully, the new Credit Reporting Changes allow lenders to take more recent bill payment behaviour (paid when due or late) into account when you make your application, rather than just looking at those bills you may have failed to pay on time. If you have missed a few payments in the past, it’s important to ensure you pay all future bills on time. This shows you are financially responsible and likely to meet your repayments on time, every time going forward.    

    Consolidate your debts into one monthly payment

    Having multiple debts attached to your name can sometimes put lenders off accepting your application. Thankfully, refinancing your loans into a single monthly payment may serve to not only reduce the total amount you must repay (including interest), but also help your borrowing capacity. 

    Precisely calculate your living expenses

    It’s likely that you’ll be required to declare your monthly living expenses when making an application for a home loan. Lenders will factor this into their calculations to determine whether your income is enough for you to meet your living expenses and repay the loan you’ve asked for. So, ensure you know exactly what your living expenses are and consider if there are any regular expenses you could easily reduce. 

    Start to build your savings

    Having funds in your savings account is a good sign to lenders that you’re responsible with money and having a regular savings history may reinforce your ability to meet regular financial commitments. This may substantially increase your borrowing power and even give you some negotiation power for the terms of your loan, such as interest rate or other terms, conditions or fees, especially if you have a larger initial deposit. 

    Once you’ve organised your loan, make sure you consider how best to protect your ability to meet your repayments. ALI’s Loan Protection Plan provides cover for 11 serious medical conditions, death, and involuntary unemployment. Get your quote here, or for more information, speak to your local broker today.



    Loan Protection Plan is jointly issued by Hannover Life Re of Australasia Ltd ABN 37 062 395 484 (Death, Terminal Illness, Living and Accidental Injury Benefits) and QBE Insurance (Australia) Limited ABN 78 003 191 035 AFSL 239545 (Involuntary Unemployment Benefit). It is distributed by Australian Life Insurance Distribution Pty Ltd ABN 31 103 157 811 AFSG 226403 (ALI). ALI receives commission for each policy sold. Any advice provided is of a general nature only and does not take into consideration your personal objectives, financial situation or needs. You should consider the Product Disclosure Statement when deciding if this product is appropriate for you.

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