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Need a personal loan? 10 ways to increase your chances of approval


There are a few steps you can take to get in the good books and secure that much-needed loan.

If you're on the hunt for a personal loan, you've probably already decided exactly where that extra money will go. Maybe you want to consolidate debt, buy a new car or make some home improvements. In short, you've got your hopes up.

That's why getting knocked back can be so disappointing. A rejection throws a major spanner in the works and your plans suddenly come to a grinding halt. But there are ways to reduce the risk of that happening.

1. Check the basic lending criteria

No matter where you borrow money from, it could be a bricks-and-mortar bank, a digital lender or a buy now pay later provider, they'll all have some basic conditions that you have to meet. These are usually referred to as lending criteria.

Not meeting the lending criteria is the quickest way to get rejected for a personal loan. Check all of the lending criteria carefully before you even apply.

Criteria can vary between lenders. Some may set a minimum annual income, others will only lend to Australian citizens and permanent residents. All will ask that you're over 18 years old and have sufficient ID.

2. Be patient if you're on work probation

If you're still in a probationary period at work, it's probably best to hold off on your loan application for a while. That's because the majority of lenders will want proof of a stable and consistent income.

Digital lender NOW Finance offers loans to people in a variety of employment situations. For example, you may be eligible for a loan if you're permanently employed on either a full-time or part-time basis, casually employed for at least 6 months or self-employed for at least 24 months. You can even supplement your regular earnings with a portion of your Centrelink income, effectively upping the amount of money you can borrow.

However, it won't lend to anyone who is on work probation. If that applies to you, it's worth just keeping your head down at work and waiting until you're taken on permanently. (Good luck!)

An employee and employer sign contracts together.

3. Get a free credit report

Lenders use your credit report to figure out how you've managed your debts in the past and whether you seem like a responsible borrower.

It'll show information including the type of accounts, loans or debts you have, your payment history, your current credit limits and current balances.

It'll also show whether you have any current bankruptcies (within 7 years), any released bankruptcies (usually up to 3 years), and if you have any debts that have been turned over to a debt collection agency.

You can get a free credit score and credit report from Equifax, Experian, or illion. Some lenders will use multiple credit bureaus, so it's worth requesting your credit score from all three so you can get a full picture of what your credit report might looks like to a lender.

💡 Did you know? Requesting a credit report won't impact your credit score.

4. Find a guarantor

Sometimes, lenders will allow you to add a guarantor to your loan. A guarantor is somebody who promises (and is legally obligated) to repay a loan if you're not able to.

Usually, guarantors are parents to the borrower but it doesn't have to be that way. It could be any friend, relative or partner, as long as they're over 18, are accepted by the lender and fully understand the commitment they're making.

A father helps his adult son with finances.

5. Clean up your bank statements

In addition to your credit score, lenders will often look at your recent bank statements to get a better idea of your spending habits and to see if there are any red flags. For example, they might look for overdrawn fees or frequent transactions for gambling.

Tony Dougherty, credit operations leader at NOW Finance, says bank statements are becoming a big part of credit assessments across the industry.

"Clean bank statements go a long way in assisting a hassle-free approval," he told Finder. "How and where you spend your money can have an impact on whether you are approved for a loan."

According to Dougherty, even small amounts of payday loans and buy now pay later transactions can play a part in credit assessment. Lenders will also review bank statements to determine your general cost of living and whether there's room to repay a loan.

A couple looks at bank statements together.

6. Check your chance of approval

Since applying for a personal loan can have an impact on your credit score, it's worth finding the providers which are most likely to approve you, before you send everything off.

You can do this by downloading the Finder app and filling in your credit profile. The app then calculates your chance of approval by comparing your profile to other Finder members' successful applications for credit.

In some cases, if we don't have enough information to model your chance of approval for a lender, we'll work with that lender to do the calculation.

7. Figure out what you can really afford

Before applying for a loan, work out your regular monthly income and outgoings, so you can clearly see how much you have left at the end of the month.

If you apply for a loan which is too big, your monthly repayments may end up being higher than you could afford and a lender will quickly reject the application.

"It's just common sense to ensure an applicant can repay a loan without feeling overwhelmed," said credit expert Dougherty. "As a good corporate citizen, we don't ever wish to put a customer in a position of hardship," he said.

Remember, it's better to apply for a smaller loan that you can comfortably repay, rather than finding yourself sinking under a debt that's too big to manage. In short, only borrow what you need, and never take out a bigger loan just because you can.

A young woman looks at her laptop in concentration.

8. Provide security

If you own any valuable assets – for example, a home, car, or boat – you may be able to declare them as security on your loan.

This gives lenders confidence that you'll be committed to repaying your loan. Doing this might also give you access to a better interest rate, making your loan cheaper in the long run.

For example, NOW Finance's unsecured personal loans come with a minimum interest rate and comparison rate of 5.95%* p.a., for borrowers with excellent credit. However, if you can access a secured personal loan, you can enjoy a much lower interest rate and comparison rate of just 4.45% p.a.*

🔥 Hot tip: To see what rate you might pay for a personal loan through NOW Finance, visit the Get My Rate feature.

9. Be honest

While individual lenders will have their own specific requirements, Dougherty said there's one thing that is important to every lender and will also ensure potential borrowers don't end up with a debt they can't repay. Honesty.

"If the applicant is unsure regarding their current situation, it is best for them to contact the prospective lender, ask questions and be honest regarding their situation," he told Finder. "This information will help establish whether the lender can help."

A woman talks on the phone while looking at her laptop.

10. Talk to a broker

If you've got to the end of this article and you're worrying that you might not be the ideal candidate for a personal loan, it might be worth talking to a broker.

Brokers can give advice on which lenders might take you on as a customer, given your specific conditions, and can potentially find you a better interest rate. While not all brokers charge fees, some do, and it's important to be aware of this before jumping in. Just ask them clearly about their fee structure so you don't get a nasty surprise.

A couple talks to a financial advisor in their home.

Compare personal loans from NOW Finance

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Name Interest Rate (p.a.) Comp. Rate (p.a.) Application Fee Monthly Fee Monthly Repayment
NOW Finance No Fee Unsecured Personal Loan
NOW Finance logo
Finder award winnerFixed18 Months - 7 Years $5,000 - $50,000
Interest Rate (p.a.)
to 26.95%
Comp. Rate (p.a.)
to 26.95%
Application Fee
Monthly Fee
Monthly Repayment
Go to siteMore Info
NOW Finance Secured Personal Loan
NOW Finance logo
Fixed18 Months - 7 Years $15,000 - $100,000
Interest Rate (p.a.)
to 21.65%
Comp. Rate (p.a.)
to 21.65%
Application Fee
Monthly Fee
Monthly Repayment
More Info
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