How to Increase Your Borrowing Power

Updated: Aug 4, 2021

Your borrowing power refers to how much you can apply to borrow from lenders and get loan approval. Factors that effect your borrowing power are usually your income, family size, debt, type of loan, the location of the security and which lender you decide to go with. There are some simple ways to increase your borrowing power, so we've outline some below:

1 - Reconsider your Credit Cards/Credit Card Limits

If you have unused credit cards, think about cancelling them. When you're applying for a loan, the spending limit of a credit card is factored into your liabilities (as you could potentially spend that amount at any time). If you do use your cards but never get near the limit, consider lowering it as this will improve the amount you can borrow.

2 - Consider a Fixed Interest Rate

When you apply for a standard variable interest rate - most lenders add a buffer of about 1.5% to mitigate risk. This higher assessment rate can reduce your borrowing power so applying for a fixed rate may be an option for you.

3 - Think About Consolidating Your Debt

While not all debt can be easily consolidated, it is a good idea to consolidate any debt that has short repayment terms if the monthly repayments are expensive. Unsecured debt does not appeal to lenders as logically, it limits how much money you have to repay your mortgage.

4 - Focus on Your Living Expenses

When calculating your borrowing power lenders will look at how much you spend weekly/monthly to make sure you can afford a loan. This takes into account how much you spend on groceries, transport, entertainment, insurance, personal items, school fees etc.

5 - Save!

This may be obvious but someone has to say it.... save! The more money you have in the bank the better. Lenders look for "genuine savings" and it is preferred that you have 3-6 months worth. All in all, the more money you have means the lender can be more secure in lending to you because they're confident you can repay the loan.

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