What Level of debt do you currently have?
Are you planning to take out a loan for a personal or business purpose, or to buy a home? If so, then it is important to understand how your current level of debt can affect your ability to borrow money. Here are some frequent questions and answers to help you understand how debt can impact your borrowing power.
Q: What types of debt can change my borrowing power?
A: Any type of debt that you currently have can affect your borrowing power. This can include credit card debt, personal loans, secured car loans, buy now, pay later debt, mortgage debt, and HECS/HELP debt.
Q: Why does my current level of debt matter when applying for a loan?
A: Lenders want to know that you can make your loan repayments on time, and your existing level of debt can impact your ability to do so. If you have high debt or other financial commitments, this may mean that you have less disposable income available to make loan repayments.
Q: Can having too much debt cause my loan application to be rejected?
A: Yes, having too much debt or other financial commitments can impact your loan application and even cause it to be rejected. Lenders want to see that you can afford to make your loan repayments, and if you have a lot of debt already, this may be a red flag.
Q: How can I improve my borrowing power?
A: There are several ways to improve your borrowing power, including earning a higher income, living within your means, cutting unnecessary spending, and paying down existing debts like credit cards and personal loans. It's important, to be honest about how much you can afford to borrow and to speak to your lender about the size of your repayments.
Q: What should I do if I'm concerned about my current level of debt?
A: If you're worried about your level of debt or other financial commitments, it's best to speak to a debt counselor or professional adviser for further advice on managing your debt.
Q: If I have dependants can that affect my borrowing capacity?
A: Yes, the more dependants apart from a spouse can affect your borrowing capacity
Q: Before I lodge my tax return should I see my broker?
A: You don't need to see your broker before you lodge your tax return.
In conclusion, your current level of debt can impact your borrowing power, so it's important to understand how it can affect your loan application. By taking steps to manage your debt and improve your borrowing capacity, you can increase your chances of being approved for a loan that meets your needs.