HOW TO APPROACH A BANK FOR MONEY?
Sorry, you’re not Rihanna. Rolling up and yelling “….better have my money!” isn’t gonna work for you. So what’s the right way to ask a bank for money?
Well, showing the banks that you are financially fit, responsible and ready to take action can help your chances.
Make sure that you have all your paperwork within easy reach before talking with a finance strategist to find out which lenders to approach.
Every lender is different, so for comprehensive advice on which documents you need to prepare, make sure you talk with your broker or lending manager.
SHOW YOU ARE FINANCIALLY FIT
There are several things you can do in order to present your best self to the banks. Here are some ways you can show that you are ready to take action.
BE ON THE BALL WITH TAX RETURNS
If you are self-employed, preparing and lodging your tax return as soon as each financial year is up can help you streamline the application process.
If you haven’t kept up to date with your tax, the whole process will take longer. That’s because you will usually need to show your notice of assessment for the past two or three years.
GET A PERMANENT FULL-TIME JOB
It can be more difficult to get a loan based on self-employed or casual income. Most lenders will favour those who hold a permanent position, and – the longer the better.
If you have only just started at your job, chances are you will be in a better position to get a loan 12 months down the track.
DEVELOP A SAVINGS PATTERN
If you can set aside a certain amount of savings each month over a couple of years, you can show the bank that, a) you have extra money and, b) you are responsible and conservative with it.
This is fruitless, however, unless you can prove it. So, make sure you document a consistent savings pattern by managing your transactions. What does this mean? It means keep a separate account for savings and make regular deposits into it.
TRIM DOWN YOUR CREDIT CARD LIMITS
So what if you only spend $1,000 every month with your credit card – if your limit is $10,000, the banks will see this as a liability.
Minimising your credit limit to reflect what you actually spend each month may allow you to borrow more.
FIX YOUR CREDIT RATING
A lot of people don’t know they have a poor credit history until they get knocked back after applying for a loan.
Missed or late payments, loan applications and finance arrangements such as phone plans or car loans all get recorded against your file.
There are several websites where you can register to view your credit file.
PREPARE YOUR PAPERWORK
Before approaching a bank or broker, it is important to gather together all of the paperwork you will need.
This will help you streamline the process as well as show that you are ready to go without hesitation.
Lenders can require different documents based on their policies. Different types of borrowers may also need different types of documents depending on the type of income they receive and whether they have existing finance or properties.
Here is a list of the most common things needed in order to apply for a loan.
Income documents, such as payslips or account statements that show three months of income received by PAYG employees. Self-employed individuals will usually need two or three years of tax-agent prepared tax returns, as well as the notice of assessment for each financial year.
Proof of rental income, such as a current tenancy agreement or statement from property manager, or recent tax return that shows the amount received.
Proof of income from shares, such as a shareholding statement or most recent tax return.
Proof of Centrelink payments like the Family Tax Benefit. You will need a letter from Centrelink that documents your regular payment and a bank statement showing three months’ worth of payments.
Proof of identity documents, you will normally need to show 100 points of ID, such as a birth certificate, driver’s license, passport or citizenship certificate.
Proof of savings, normally around three to six months’ worth of statements.
If using an existing property as security, you will need a rates notice, the notice of valuation and insurance documents.
Asset documents, such as your vehicle registration, and account statements for a term deposit.
Liability statements that document the current outstanding balance of any debt including personal and car loans.
Other statements depending on your situation, for example, if you are using a guarantor to back up your loan, they will need to provide their proof of identify, income and asset documents.
WHICH BANKS SHOULD YOU APPROACH?
Now that the lending environment has become so heavily restricted, it is better to avoid risking a loan rejection – which could hurt your credit file. It’s best to discuss your needs with a finance strategist instead.
A finance strategist can assess your needs and serviceability in order to find the best lender to approach.
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