Borrowers have “nowhere to hide” when it comes to their spending habits, and should be aware their discretionary spends are on lenders’ radars.
“Some banks now require transaction statements, which means borrowers can’t hide with their history of spending. The rise in ‘tap and go’ payments plus technology such as bankstatements.com.au can classify spending into categories and give a lender full visibility on applicant’s spending patterns and how much they save – this level of disclosure is unprecedented,” Aaron Christie-David, managing director at Atelier Wealth, told Nest Egg.
“Examples include Afterpay, frequent holidays, high spending on credit cards and even spending on gambling, alcohol and dining are being hauled into question if they are ongoing expenses after their loan has settled or if this constitutes discretionary spending.”
There are steps borrowers can take to make themselves a more attractive candidate, said Mr Christie-David, including the tried-and-tested drawing up a budget and reducing liabilities.
“Most borrowers can’t provide a budget, so this is a great place to start. Get your spending under control and show the bank you have a track record of saving to demonstrate confidence you can repay a loan. Get rid of credit cards you’re not using or reduce limits, it helps to improve borrowing capacity, and clear Zip Pay or Afterpay purchases,” he said.
“Most importantly is your ‘conduct’ on your current loans – if you are showing missed or late payments this could be a deal breaker for some banks. Also pick your lender wisely. For example, applying to Westpac means they can look through your account conduct if you have St George accounts, St George is owned by Westpac.”
This follows a report from online broker marketplace, HashChing, about the most common reasons investor loan applications get knocked back. You can read this in full here.