This information is designed to assist you in getting through the finance application process with the greatest ease – with no further questions asked.
1. Shopping around
Sadly some individuals still think it is better to go to a bank rather than a broker to get the best deal but every time they apply at a bank branch, guess what happens? Their credit file is accessed. And then three or six or even 12 months later they are now really ready to get that loan and they re-apply only to be told NO – they cannot get a loan because they have too many hits on their credit file and automatic credit scoring has prevented them from going ahead. But no-one at the bank will tell them this sad fact when they are doing these initial enquiries. Excuses about their serviceability or maybe the high LVR – (loan to value ratio) or even too many children could be the excuse given why they have failed to be approved! But this could easily have been prevented by having someone independent review your financial position and advise you the best options, taking all your circumstances into account. Also check your credit score for free at www.getcreditscore.com.au to get a simple indication of how the banks view you and then get access to your full credit file at www.mycreditfile.com.au and if you find anything peculiar get it sorted way before you have to get a loan.
2. Not telling the truth
In years gone by, banks didn’t know what other credit you might have out there or how you were managing your debts but now, there is very little that can be kept secret. And what’s amazing is how often people pay by direct debit but don’t expect anyone will notice you are paying 5 other credit cards, personal, furniture and car loans but all too often it comes out of the one savings account that your wages go into. And this is the account that all banks now ask for 3 months’ worth of transactions to review all expenditure and where most often people are caught out. These same activities will more often than not also appear on your credit file. It makes your application process so much easier if you declare all liabilities up front – particularly those that you are not even using at the moment. While it is easy to have a credit card with a low limit only used for internet slip your mind, or that furniture loan that only takes $100 a month, try and keep a regularly updated list of assets and liabilities so you know where your direct debits are coming from and what is your actual statement of position so when applying for a loan we can see all the issues, and direct your application to the most suitable lender for your situation.
3. Choosing a loan on interest rate only
While interest rates are important, dare I say it but when I was growing up, we didn’t get bombarded with daily updates on the Australia dollar or what on earth the Reserve Bank got up to and life was clearly the better for it. I cannot imagine how this information enriches are lives but I know one thing for sure: interest rates are not the primary deciding feature of a loan. You need to have a discussion around how long do you want this loan, what is its purpose, how you intend to pay it off, your exit strategy for this property purchase and what is the money going to be used for (as it might be leveraging for a business purpose or cash for other property purchases). Valuations at a different bank can often be a major factor and brokers now can usually order these for clients at several banks for free to ascertain which one will give us the largest amount against the one property. A client very concerned about interest rate offers, was happy to pay a higher rate when his valuation can in $400,000 higher at a second bank. Other questions to ask include do you need an offset account, would more than one be useful and are they free in a package? How many loans do you have in the one package (as some banks charge extra for over 5) Will this property one day become an investment? How much deposit do you have and are any banks offering discounts on LMI (Lenders Mortgage Insurance) which is insurance you pay for the benefit of the bank.
Sometimes you just need someone to ask you the right questions and your decision becomes a lot clearer.
Good luck getting the right loan for your needs.