Honesty is the best policy when it comes to loan applications

Honesty Is the Best Policy When It Comes to Loan Applications

Mark Stevenson, Managing Director at Bell Partners Finance (now Evolve Lending & Finance) wrote for The Western Weekender on the growing importance of transparency in loan applications, and the very real risks that come with leaving out or embellishing information when approaching a lender.

Research from Experian found that one in five Australian borrowers had embellished or omitted details on loan applications, while 60 per cent did not fully understand how lenders assessed their applications. In an environment where banks have access to more data than ever before, this is a significant risk for borrowers who think a small omission or modest exaggeration will go unnoticed.

Lenders now conduct a thorough forensic review of bank statements, credit card records and recurring spending patterns. Childcare costs, education fees, insurance premiums, subscriptions, entertainment spending and frequent food delivery or takeaway purchases are all part of the picture lenders build of a borrower’s true financial position. A pattern of Afterpay arrears, regular gambling transactions or consistently high discretionary spending can affect the outcome of an application even when the borrower’s income and stated expenses suggest capacity to repay.

The more serious risk is not the poor spending habits themselves, but the act of misrepresentation. Mark noted that telling less than the full truth can have a more damaging impact on a loan application than simply having a challenging credit history. Lenders view deliberate omissions as a trustworthiness issue, not just a financial one, and the consequences can extend beyond a single declined application.

The most effective approach is to present a complete and accurate picture from the outset and, where necessary, address any issues in advance with the guidance of a broker who understands what lenders are looking for.

Preparing for a loan application? Contact Evolve Lending & Finance for honest, clear guidance on how to present your best case.