How do lenders assess or profile an application?
Each lender may use the information in your application slightly differently in regards to how they may assess your application and some lenders also profile the strength of the client in the application to determine what interest rate would apply to the loan.
One of the first things an assessor at the financier will see is your credit file and it is most important that you take care of your credit file for this reason, as it will be an assessor’s first impression of your application.
It is very important not to formally apply to many lenders when shopping for the best deal. This is sometimes very tough, as many finance introducers and lenders would advise that they cannot tell you exactly what interest rate you could achieve unless you provide a full application.
Whilst this is true, if you were to go to a qualified professional, they should be able to estimate your interest rate quite accurately based off your information provided without formally applying for the loan, or placing any enquiry on your credit file, but this would be subject to the information provided from the applicant to be as accurate as possible.
The more enquiries on your credit file in a short period of time can result in your new application being declined, or it may result in your interest rate being higher if it were approved than if you had less activity on your credit file. This is very annoying for the consumer, who is just shopping for the best deal, but unfortunately your credit file is the lenders first impression of your application and you only get one chance at a first impression.
The assessors will also be looking at your stability in your employment and residence and the less jobs, or residences you have had in a 3 year period, the more stable you would be deemed and this would class you as a stronger applicant.
Your job occupation and residential status would also come into consideration. For example, a Doctor who owns his home is going to be a stronger applicant than a young borrower that worked as a retail assistant, living at home with his parents. However, this does not mean that the young borrower cannot still get a great deal, just that the Doctor would have more options.
The other important factors in regards to profiling your application would be your net asset position, which will take away all your liabilities from your assets, with property and cash being classed as the highest class of assets. The higher your net position, your application will present better.
The same would go for your surplus income, which would take away all your expenses away, including the lenders standard calculation for living expenses away from your net income. The lenders living expense will be based on your marital status and how many dependents you had. This would then leave a surplus amount after your proposed car repayment. The higher the surplus, the stronger the application will look.
Also the vehicle will be an important factor with the assessment as to how much you wanted to borrow against it and the considerations would include the sale price against the lenders valuation for the car, which most lenders use different variations of glasses guide (www.glassesguide.com.au), how much equity going into the deal, such as net trade in after payout if any and/or cash deposit. They would assess the risk based on the loan to value ratio of the car to the full borrow amount and with some lenders could result in a different interest rate.
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