Maximizing Your Borrowing Power:

How to Calculate and Improve It

When it comes to fulfilling personal, home, or business-related financial goals, obtaining a loan can be a helpful solution. However, understanding that your current debt can influence the amount you can borrow from a lender is crucial. Excessive debt can even lead to rejection of your loan applicationIn this article, we will explore the calculation of borrowing power in relation to various types of debt and provide actionable tips to improve your borrowing capacity.

Calculating Your Borrowing Power:

Lenders assess your borrowing power by considering any outstanding debts or financial commitments that consume a portion of your income. They do so to gauge your ability to make loan repayments. The following types of debt can impact your borrowing capacity:

  1. Credit Card Debts: Unsettled credit card balances are taken into account when determining your borrowing power.
  2. Existing Personal Loans: Any existing personal loans that you are currently repaying will affect the amount you can borrow.
  3. Secured Car Loans: If you have a secured car loan, the outstanding balance will influence your borrowing capacity.
  4. Buy Now, Pay Later Debt: Debts accumulated through services like Afterpay can limit the amount you can borrow.
  5. Other Mortgage Debt: If you already have other mortgage debts, lenders will consider them in assessing your borrowing power.
  6. HECS/HELP Debt: Higher Education Contribution Scheme (HECS) or Higher Education Loan Program (HELP) debts are also factored in.
Improving Your Borrowing Power:

While earning a higher income positively impacts your borrowing capacity, there are additional ways to enhance it:

  1. Live within Your Means: Reduce unnecessary spending on luxury items such as entertainment and vacations. By living frugally, you can allocate more funds toward loan repayments.
  2. Eliminate Unnecessary Debts: Pay off credit cards and strive to make extra repayments on existing debts like personal loans. This proactive approach will help decrease your debt load and demonstrate financial responsibility.
  3. Accurate Assessment of Affordability: Be honest with yourself and your lender about your financial capabilities. Discuss your desired loan amount and evaluate the corresponding repayment amounts with your lender. This transparency will ensure that you don't overburden yourself financially.

Seek Professional Advice:

If you are concerned about how existing debt might impact your financial situation, it is wise to consult a debt counselor or professional adviser. These experts can provide tailored advice on managing your debt effectively, improving your financial position, and maximizing your borrowing power.


Understanding how your borrowing power is determined in relation to different types of debt is essential when seeking a loan for personal or business purposes. By assessing your financial commitments, eliminating unnecessary debts, and seeking professional advice, you can optimize your borrowing capacity. Take control of your financial future by managing your debt wisely and making informed decisions to achieve your goals, see the calculator here.