Australian
Internet Loans
Australian Credit Representative 401491
Australian Internet Loans :: Articles
SHARE

Share this article!

Loan Finance: How to Shop Around Without Damaging Your Credit

Loan Finance: How to Shop Around Without Damaging Your Credit

If you are considering taking out a loan, you wouldn’t go out of your way to make it harder on yourself to get approved or to get a good interest rate, would you? Yet many loan applicants would enjoy a considerably better outcome on their loan application if they followed this important rule.

When you apply for a loan, whether it be an online finance application or in person at a bank branch, there's are a whole list of criteria that you will need to meet in order to:

  1. get approved for a loan that meets your needs
  2. get the best interest rate for the loan finance you want

Whilst your income, your age and your employment history are all important determinants for your loan eligibility, your credit rating may be the most important factor that a lender will use in:

  • determining your loan eligibility and
  • Need a Bigger Boat?
    We provide direct access to the best Boat Loan rates and options in Australia through our national panel of specialist marine finance brokers. Simply complete our quick & easy Boat Loan quote enquiry form to see if you qualify - and to gain access to the best Boat Loan offers from our broker panel.
  • the loan interest rate that you'll be offered if you do qualify

Ok, most everyone knows that you need a good credit rating to get a good loan - but many don't necessarily understand all of the factors that can damage your credit rating.

Late payments, defaults, bankruptcy, etc, rep some of the obvious things that will negatively impact your credit rating, but there is one key thing that a large proportion of would-be borrowers overlook ... and that is multiple loan applications.

Multiple Loan Applications 

If you're in the market for a loan to finance a home or a car (or anything for that matter), it seems reasonable that you'd apply with a few lenders and pick the one offering the best deal. Right?

After all, there are so many loan offers at your fingertips, they all make it really easy apply and comparing the responses is the best way to test for a loan approval and know that you'll get the best deal. Right?

You'd be wrong on all counts ... and here's why.

Each time you make a loan enquiry, the lender checks your credit file in order to very information that you have provided and to determine the risk to them in lending you money.

Each time a lender accesses your credit file, the enquiry is recorded on your credit file. In other words, whenever you go shopping for a loan, the lenders all get to see all your other enquires.

Each loan application, mortgage enquiry, credit cards, personal loans etc are all listed in your credit file.

Here's the Problem

Lenders do not like to see multiple loan applications on your credit file. In fact, most lenders have automatic disqualification rules for multiple applications.

The reason why lenders can be so inflexible on multiple applications is because they view anyone who has made more than a given number of loan enquiries in the last 12 months as a higher risk. And for lenders, it's all about risk.

If you are making multiple enquiries, it's probably because you are either

  • already having trouble getting approved and trying as many lenders as it takes in order to get approved or
  • just "shopping around" without any real commitment to proceed with a loan.

It's important to note that it costs a lender money when you make a loan enquiry because they can't give you an approval or even a quote without processing a loan application and assuming all of the costs that go with that process (including the cost of acquiring your credit report).

When you do take out a loan, it can take a few years for the lender to recover costs and make a profit.

So, if a lender sees you as a "shopper", even though you may have a perfectly clean repayment history and a great job, they see some risks:

  • they will need to spend money and resources on processing a loan enquiry that probably won't proceed because you've already been approved elsewhere 
  • you'll possibly jump ship part way through the loan should you find a better rate. That's not profitable business for them
  • if you've racked up multiple enquiries whilst shopping for an approval because you've been declined elsewhere, every additional enquiry will make your position worse. Only a brave lender goes against the tide!

The lenders' attitude is, if they can clearly identify you as a shopper, they are unlikely to write the loan! The result, application rejected, reason: too many credit enquiries!

Here's the Solution

Find a good Finance or Mortgage Broker because they:

have access to most banks and lending institutions.

know all the deals and where to obtain the best deals for you.

identify which lender/s offer the most likelihood for getting your loan application approved.

So, it's only after you've found the loan you want that you need to make a loan application.  You have only one application recorded on your credit file and you are not seen as a shopper.

Some people think that they can do just as good an analysis as a Broker. But, without access to the research technology available to the Broker, the most likely outcome would be an inferior deal and/or you mess up your credit rating in the process.  Counter productive.

Most Important

When dealing through a mortgage or finance broker, be sure to tell them everything. It's only by providing the broker with a complete picture of your situation and circumstances can he or she will be able to get you the deal that's best for you.

By definition, a Broker represents you and is not an employee or agent of the lender/s. If you are not completely honest with your broker, you run a high risk of being recommended to the wrong lender for your situation. This can result in you being approved at a higher interest rate than initially quoted for your loan - or your application might be rejected entirely.

That could serve to damage your reputation with the broker and lenders. Avoid!

Published:Tuesday, 24th Aug 2021
Author: 150

Share this article:

Car Finance- Quick & Easy
If you are in the market for a new or used car, then we're in the market to help you arrange the money. Our car loan & leasing finance service is backed by a national panel of car loan specialists who will establish your eligibility, find lender/s offering the best deals for your situation - and help you through the approval and settlement process. No charge to you - and no obligation to proceed with any recommendations offered.
Time to Refinance?
If you are seeking lower rates, lower fees and more flexibility in your home loan. you are in luck! Our national panel of mortgage brokers is looking forward to an opportunity to assist you. Apply online for a free eligibility assessment and one of our broker network refinance specialists will get on the case to track down the best deal for your individual circumstances. Without any obligation and at no charge to you!

Finance News

Australia Gears Up for Comprehensive Financial System Resilience Assessment in 2025 Australia Gears Up for Comprehensive Financial System Resilience Assessment in 2025
27 Mar 2024: .Paige Estritori

The Australian Prudential Regulation Authority (APRA) is positioning itself to inaugurate a widescale diagnostic of the nation's financial heartbeat in the year 2025. This financial health check aims to meticulously analyze the repercussions of unanticipated events on the country's financial stability beyond merely scrutinizing the banking sector. - read more
Climbing Mortgage Arrears Signal Heightened Financial Strain Climbing Mortgage Arrears Signal Heightened Financial Strain
26 Mar 2024: .Paige Estritori

Australian households are navigating a more complex financial landscape as mortgage arrears have climbed to a peak not seen since the outset of the COVID-19 pandemic, according to a new report from Fitch Ratings. The Fitch's Dinkum RMBS index has indicated that, as of the last quarter of 2023, households are falling behind on mortgage payments more frequently, sparking concerns about financial resiliency amid ever-tightening economic conditions. - read more
New Investment Approach for Australian New Homebuyers New Investment Approach for Australian New Homebuyers
25 Mar 2024: .Paige Estritori

Recent statistics have highlighted a notable shift in the strategies Australian first-time homebuyers are using to infiltrate the challenging property market. Analysis of 2023's purchasing trends indicates an emerging investor mentality among new buyers. - read more

Finance Articles

Online Personal Loans: How to Protect Your Information and Avoid Scams Online Personal Loans: How to Protect Your Information and Avoid Scams
In recent times, Australians have witnessed a notable uptick in the use of online personal loans. The trend emerges as part of a broader digital transformation, where convenience and speed take precedence. This shift has facilitated access to financial services with just a few clicks, making personal loans available to anyone with an internet connection. - read more
5 Key Steps to Take Before Applying for an Online Loan 5 Key Steps to Take Before Applying for an Online Loan
Applying for an online loan can be a convenient way to manage your finances from the comfort of your own home. With technology's advancement, borrowing money has shifted from traditional brick-and-mortar institutions to digital platforms, making the process quicker and more accessible. However, navigating through this online landscape requires an understanding of how it operates. - read more
5 Smart Debt Consolidation Moves for a Financially Savvy Future 5 Smart Debt Consolidation Moves for a Financially Savvy Future
The landscape of personal finance is continuously evolving, and in Australia, this includes the manner in which debt is managed. In recent times, an increasing number of Australians have found themselves navigating the complex maze of personal debt, from credit cards to student loans, and grappling with the impact this has on their financial well-being. - read more