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Personal Loan Assessment Checklist: Everything You Need to Know

Helpful Money Tips

Thinking about applying for a personal loan? It can feel like a big step, but understanding the process makes it much easier. Knowing what lenders look for and the information you'll need will give you a better chance of approval. In this guide, we'll answer some key questions: How do you assess a loan? What information do you need to apply for a loan? What documents are required to assess a loan in Australia? And what factors do lenders consider when looking at your application?

How is a Personal Loan Assessed? 

Assessing a loan means looking at your financial situation and making sure the loan is a good fit. Lenders want to know that you can afford to repay the loan without financial stress. Here are the basic steps: 

  1. Figure out how much you need: Before you apply, think about the amount you want to borrow and what you’ll use it for. Whether it’s to pay off other debts, make home improvements, or cover an emergency, knowing your purpose helps lenders understand why you're borrowing. 

  2. Check your eligibility: Every lender has basic requirements. You’ll need to be over a certain age, usually 18, and be a resident of Australia. You’ll also need to meet income requirements and have a steady job. 

  3. Look at your finances: Take a close look at your income and expenses. Can you comfortably manage loan repayments along with your other bills and expenses? Lenders will do this to make sure you don’t struggle to pay the loan back.  

  4. Review your credit score: Your credit score is a number that shows how good you’ve been with managing money in the past. If you’ve paid off past loans on time, your score will be higher, and lenders are more likely to trust that you’ll pay them back, too. 

  5. Compare loans: Not all loans are the same. Compare different lenders and their terms, like interest rates, fees, and repayment plans. This way, you’ll find the one that works best for you. 

Five Pieces of Information You Need to Apply for a Loan 

To apply for a loan, you'll need to give lenders some key details about yourself and your finances. These help them decide if you can handle the loan. Here's what they usually ask for: 

  1. Personal identification: Lenders need to confirm who you are, so you’ll be asked for proof of identity like your driver’s licence, passport, or Medicare card. Each company has slightly different requirements that should be listed before you apply. 

  2. Income information: Lenders want to know how much money you earn, so they may ask for your recent payslips or, if you're self-employed, tax returns. This helps them figure out if you can afford the loan repayments. 

  3. Employment details: You’ll need to share your job information—where you work, how long you’ve been there, and if you're full-time, part-time, or casual. Lenders prefer it when you have stable employment. 

  4. Expenses and debt: Lenders will want to know what your regular expenses look like. This includes rent or mortgage payments, utility bills, and any debts you have, like credit cards or other loans. Again, each financier has slightly different requirements.  

  5. Reason for the loan: Some lenders may ask you why you're borrowing. Whether it’s to consolidate debt, fix up your home, or cover unexpected medical costs, being clear about your reason can speed up the process. 

What are the Necessary Documents Required to Assess a Personal Loan in Australia? 

In Australia, lenders need documents to verify the information you provide in your loan application. These documents provide a clearer picture of your financial situation. Here’s what you’ll usually need to submit: 

  1. Proof of identity: This could be your driver’s licence, passport, or Medicare card. It confirms who you are and that you’re a resident of Australia. 

  2. Proof of income: Lenders may ask for recent payslips, if you're self-employed, tax returns or business statements will show your income. 

  3. Employment verification: Sometimes, lenders want a letter from your employer that confirms your job details, such as your position and salary. 

  4. Bank statements: Lenders typically ask for your bank statements from the last three months. This helps them see your spending habits, savings, and any regular payments you’re making.  

  5. Credit history: While you don’t need to provide this directly, lenders will check your credit report. It shows them how well you've managed loans or debts in the past. 

Four Factors Used to Evaluate a Loan Application 

Lenders use a few key factors to decide if they’ll approve your loan application. These factors help them figure out if you can manage paying the loan back. Here are the main things they look at: 

  1. Credit score: Your credit score shows how responsible you've been with money in the past. If you’ve paid your bills and loans on time, your score will be higher, making you more likely to get approved. 

  2. Income and employment: Lenders want to see that you have a steady income and a stable job. If you’ve been working for the same employer for a while and still have a consistent income that’s usually a big plus. 

  3. Debt-to-income ratio: This is a fancy way of saying how much of your income goes towards paying off debts. Lenders compare your income to your debts to see if you can afford to take on more. The lower this ratio, the better. 

  4. Collateral (for secured loans): If you’re applying for a secured loan, like a car loan, lenders will look at the value of the asset you’re offering as security against the loan. If it’s valuable enough, it gives them peace of mind that they can recover their money if you can’t repay the loan. For unsecured loans, there’s no need for collateral. 

 

Applying for a personal loan doesn’t have to be overwhelming. By knowing what information lenders need and what documents you’ll need to provide, you can prepare a strong application. Understanding what lenders are looking for—like your income, credit score, and debt levels—can help you avoid any hiccups along the way. 

Before you apply, make sure to check your finances and compare loans to find the one that suits you best. A little preparation can go a long way toward getting the loan you need! 

 

Check out your credit score anytime through the following sources: 

Equifax 

Experian 

Illion 

Disclaimer

The content provided in this article is intended for general informational purposes only. It is not intended to serve as medical, financial, or professional advice. The tips and advice shared are based on general knowledge and are not tailored to the specific circumstances of any individual reader. Always seek professional advice with any questions you may have regarding your health, mental wellbeing, or financial situation.