When you enquire about or apply for for a loan, it is important you give 100% accurate information regarding your current financial situation. You need to make sure you advise your lender or mortgage broker about all your debts, including any credit cards, personal loans, store cards, rental arrangements (radio rentals), HECS debts, and any other liabilities you may have.
The banks factor in each of these liabilities when determining your borrowing capacity. It is not just the amount owing on credit cards but the whole credit card limit that is taken into account.
How will the bank know?
Not disclosing a debt you have outstanding won’t look good for your loan application. The bank will generate a credit check on you, which usually shows up any type of credit you’ve applied for in the past five years.
In other words, the bank is able to see any credit cards, personal loans or other types of credit you’ve enquired about. Even if you didn’t take out the loan or the debt, it may still show on your credit report as an enquiry.
The undisclosed debt can also show up on bank statements showing regular repayments being made from your accounts.
The true effect of undisclosed liabilities
If you have any outstanding debts that have not been included in your loan application, the lender will usually ask questions about their status. If you’ve forgotten to disclose those debts on your application, it could result in the bank declining your loan application.
Not only can undisclosed debt cause a lender to decline the application, but it will also change your overall borrowing capacity. If you have not advised of all your liabilities upfront you could be given false expectations that you can borrow more than is actually possible for you.
By giving all information upfront, we can work towards making an accurate assessment of your borrowing capacity. We might also be able to offer suggestions around lowering credit card limits or restructuring your finances correctly in an effort to increase your borrowing capacity.
It comes up quite often that people may just forget about a credit card they do not use, or the personal loan they do not see as payment happens automatically.
Make sure you always disclose all of your liabilities from the start so you are not given incorrect information from the lender and risk the chance of having your loan declined.
Call Karyn today on 1300 832 554 and discuss how you can improve the chances of getting your loan approved. The entire borrowing process becomes much smoother when you know what to expect right from the start.
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We recommend that you seek independent financial and taxation advice before acting on any information in our articles and newsletters. They contain general information only and have been prepared without taking into account your personal objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances. Your full financial situation will need to be reviewed prior to acceptance of any offer or product. Interest rates are subject to change without notice. Lenders terms, conditions, fees & charges apply.