With comprehensive credit reporting now in play, tightening lending practices and open banking having commenced, the landscape of applying for finance is changing rapidly.
Never before have the details of consumer spending been so accessible for lenders, especially as our spending patterns are shifting towards electronic payments.
With the RBA recently predicting that cash will soon be a “niche” payment method, it seems this trend is only set to continue to the point where all of our spending occurs via online transactions and this will have far-reaching implications for those looking to acquire finance.
Every transaction is recorded and banks and lenders are now increasingly looking at every aspect of daily spending through the trail left behind by online transactions.
The lending institutions are now looking at a detailed overview of your everyday living expenses…all those little transactions that go towards your entertainment, coffees, lunches and similar items because they want to see that after all your spending, you’ve still got enough left over to be able to pay any mortgage.
It’s important for borrowers to realise that lenders may increasingly look at such expenses to determine the desirability of a loan applicant.
As the regulatory climate sees lending tighten and with the advent of “open banking”, which will allow lenders an unprecedented insight into consumers’ financial data, this scrutiny of everyday living expenses, from your car loans, personal financing (be it short or medium term) to your UberEats bills is likely to increase.
There are three key things borrowers looking to source finance can do to ensure they are not hindered by their everyday spending:
Take responsibility for your repayments and bills - as ‘open banking’ comes into effect, it will be more important than ever for consumers seeking credit to make their repayments on time. If you’re regularly late or waiting for an SMS to remind you that will start to have a negative effect. If you’ve reached 15 days after the repayment date there will be a mark against your name that will be in the new comprehensive credit reporting.
Find a broker that will work with you - a broker that understands that your spending can vary depending on your circumstances; who will seek out a loan provider that will look beyond your six-month savings statement; who will understand that just because you’re spending ‘$X.00’ pre-loan doesn’t mean it’s going to be the same post-loan and, will do all this prior to your application for a loan.
Keep in mind that if one of the big four or your personal bank of however many years comes back and says no, there’s often another option for you.
It’s just a matter of working with a broker that will find you a different lender that has a more open-minded approach…not a more relaxed approach but, a more realistic understanding of your reasons for higher living expenses at a specific point in time.