Australian Property · Borrowing Power
5 practical ways to boost your borrowing power
Lenders weigh far more than just your salary. Here’s what actually moves the needle, and what you can do about it before you apply.
Reduce Existing Debts
One of the biggest factors affecting your borrowing power is your current debt. Lenders evaluate your liabilities, including:
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- Credit card balances
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- Personal loans
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- Car loans
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- Buy Now, Pay Later (BNPL) services
Even unused credit card limits can impact your application, as lenders consider them potential debt.
What you can do:
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- Pay off outstanding loans where possible
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- Reduce credit card limits
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- Close unused credit accounts
Lower debt means lower financial risk in the eyes of lenders, which increases your borrowing capacity.
Increase Your Income Stability
Lenders prefer borrowers with stable and reliable income. While a higher salary helps, consistency is equally important.
Ways to improve this:
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- Stay in the same job for longer (avoid frequent job changes)
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- Provide proof of consistent income (payslips, tax returns)
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- Include additional income streams (rental income, side business, bonuses if consistent)
If you’re self-employed, ensure your financial records are clean and up-to-date, as lenders typically assess the last 1–2 years of income.
Improve Your Credit Score
Your credit score reflects your financial behavior and plays a key role in loan approval.
A higher credit score can:
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- Increase your borrowing power
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- Improve your chances of approval
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- Help you get better interest rates
How to improve your score:
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- Pay bills and EMIs on time
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- Avoid multiple loan applications in a short period
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- Keep credit usage low
Regularly checking your credit report can also help you spot and fix any errors.
Increase Your Deposit
The more deposit you have, the less risk you pose to lenders. A larger deposit reduces the Loan-to-Value Ratio (LVR), which can significantly boost your borrowing power.
Benefits of a bigger deposit:
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- Higher loan approval chances
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- Lower interest rates
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- Avoidance of Lenders Mortgage Insurance (LMI) (if deposit is 20% or more)
If saving is difficult, consider:
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- Government grants (like First Home Owner Grant)
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- Family support (guarantor options)
Cut Down on Living Expenses
Lenders assess your daily expenses to determine how much you can realistically repay. Even if you earn well, high spending can reduce your borrowing power.
Tips to optimize expenses:
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- Track your monthly spending
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- Reduce unnecessary subscriptions
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- Limit discretionary expenses (eating out, shopping, etc.)
Creating a budget and sticking to it shows lenders that you manage your finances responsibly.