Skip links

7 things banks look for when you apply for a loan?

Banks are running a business so it’s only natural that they have a thorough assessment when you apply for a loan. After all, the amount of money at stake in loans is in the hundreds of thousands on average.

To increase your chances of getting approved for a loan, no matter what type, you should have a good standing when it comes to the following factor. 

Credit standing

One thing that your credit standing reflects is your reputation in fulfilling your financial obligations. One look at your credit report will determine whether an assessor is going to check the other files in your folder.

However, it could vary from case to case. To some institutions, good standing on a credit report means that a borrower has never been late in meeting due dates. For others, a borrower can get a good standing remark as long as all dues have been paid. 

But of course, choose to always err on the side of caution. The former is better than the latter, it’s a better guarantee. 

How do you find out your credit standing?

There are three major credit reporting companies in Australia–Equifax, Experian, and Illion.

If you have taken a loan at least once in your whole life, then a credit report under your name exists. 

You can contact these companies to get a copy of your credit report.

These companies may have access to different files about your previous loans and might therefore have different reports. 

This is why you should make it a habit to check your credit reports regularly. Check if all the loans listed in your report are truly yours or if they lack other pertinent information.

What is a good credit score? 

Good credit ratings and scores are different in every company. The ceiling score may be up to 1000 or 1200. Usually, there is a range of what is considered a good score. Scores in the 600 points and above are considered good.

What factors affect your credit score?

Your loan applications, the amount you borrowed, and the timeliness of your repayments are all considered in your credit report. 

A high credit score means the bank is not risking a huge wager if they decide to lend you money.


There is a reason why the bank wants to know all your sources of income. It reflects your capacity to pay. Usually, a higher income means a higher chance of getting approved. However, there are chances when someone with a low income gets approved for a loan. This is because there are other factors that banks and other lenders consider other than credit score and income.

Income-to-debt ratio

One way for a bank to decide if you are qualified when you apply for a loan is the income-to-debt ratio. It is calculated by dividing your debt by the income you make. The acceptable ratio cap depends from bank to bank. 

A good trick of the trade aka increasing your borrowing power is by adding as many sources of income as you can. 

income and debt are high on the list of bank inspection

Living expenses

Lenders also look at the kind of life you live by looking at your expenses. What you spend your money on and how you spend it is a reflection of your characteristics as a borrower. 

Banks use a living expense calculator to check on your day-to-day necessities as well as your discretionary expenses. 

If a lender sees that you are spending a lot on luxury items or eating out, it may be a red flag. However, there are lenders who have a fair approach and understand that these metrics are not final. Your spending behaviour may change if need be. 

Employment history

Banks also check if you have been in steady employment in the past. Not lasting long in a company may be a concern for the bank. This is because your employment status is directly tied to your income which directly affects your ability to repay a loan. 


If you have multiple assets, then you should submit an asset portfolio to your lender when you apply for a loan. Not only is it a testament to your financial health, but it also gives the bank an idea of your capacity to pay in case of a financial emergency.

In particular, they will be checking for liquid assets. Liquid assets are those that can easily be converted to cash in case you need some. 

The more liquid assets you have, the more confident a bank is in lending you money. In case you lose your job or main source of income, you will still be able to afford your mortgage repayment through your assets. 

Fixed assets or those that take some time to be converted to cash or may change value over time are also green flags to lenders. Make sure they are included in your asset portfolio. 


Collaterals are a bank’s safety net. In the event that you default on your loan, they won’t be on the losing end as they may foreclose the collateral that you pledged and sell it to other people. 

In the case of mortgage loans, the house you are taking out a loan for automatically serves as the collateral. Unless you pay down the whole loan, the house is not entirely yours. 

Down payment

Most lenders don’t have zero-down payment financing because by doing so, they are subjecting themselves to a higher risk. A bigger down payment means the bank has to shell out a smaller amount out of the total cost. 

Also, when you put down an initial payment out of your pocket, the less of the chance that you will default on the repayment. After all, you already spent hard-earned money on it. 

Overall, your chances of getting approved when you apply for a loan highly depend on your financial health. But one thing that can increase your chances even better is finding the right mortgage broker to help you present these documents so that your application will be strong in the lender’s eyes.

Book a consultation now with us and our experienced brokers will help you get your loan approval as fast as we can.