You have probably heard something in the news about the Royal Commission investigating the misappropriation of funds within the banking industry. Recently, many stories have come to light about people like you and I being issued loans that are way too large and banks swooping in to repossess their home. Nothing quite sells newspapers like sensational headlines involving the big bad banks vs. the little guy. A modern day David and Goliath.

However, if you can repay you loan and you are not in danger of the bank repossessing your home, does the Banking Royal Commission really make a difference to you?

Quite simply, the answer is yes. The Royal Commission has some very real consequences for the banks, which will be in turn, felt by us. All Australian banks are now under the microscope so every aspect of their business could be called into question. Which means they are making it more difficult to borrow money and get access to credit. So, if you want to take out a loan in the near future it is likely you will have to jump through a few more hoops than in the past.

To make sure the banks still see you as a good candidate to borrow their money, follow my advice below, in the lead up to applying for a loan:

PAY YOUR BILLS ON TIME: It might sound simple, but if the utilities and mobile bills are paid late, you may receive a black mark against your credit file. Even if they are paid late, some banks will not allow you to borrow from them.
REDUCE CREDIT LIMIT: Pay down as best you can and then decrease the limits on your Credit Cards to only what you need.
LIMIT YOUR LIABILITIES: Car loans, personal loans, store cards and credit cards, will all limit you borrowing capacity, so don’t take out a new car loan or personal loan just before you want to get a home loan.
DON’T REGULARLY CHANGE JOBS: Banks like people to be in stable consistent employment so changing jobs often or just before you want to get a loan may limit which banks will lend to you.
CAP YOUR DISCRETIONARY SPENDING: Banks will want to know how much your living expenses are and what you spend your money on. Often, they also want to see 3 months of savings and credit card statements to prove your spending habits.
HAVE A PROVEN SAVINGS RECORD: To show a bank you can save you will need to produce evidence of at least 3 months savings being consistently put aside.

In light of the Royal Commission, the banks are going to take a more conservative approach to lending. If you follow my advice, you can help make yourself more attractive to the banks looking to lend to you. If you want to borrow money in the next 12 months, give me a call and together we can tailor an individual plan to provide you with as many borrowing options as possible for your future.

Happy new (financial) year!
Michael