Planning ahead

Planning ahead

Lending standards have tightened considerably with banks more discerning about who they’ll lend to, and how much they are willing to lend. If you’re planning on taking out a loan in 2019, here are a few things to keep in mind to stay in their good books.

planning financially

Changes to lender requirements

You may have to provide a far more detailed summary of your living expenses as part of an application for finance. For example, at least three months of statements for all transaction accounts and credit cards are becoming the norm. Lenders are placing greater emphasis on checking an applicant’s capacity to ensure the loan is affordable, regardless of the Loan-to-Value Ratio and the size of the loan.

What you can do:

Make a budget. Include all your expenses (mortgage/rent, other debt repayments, groceries, education, childcare, vehicle expenses, insurance, utilities, rates, telecommunications, medical, leisure, travel, transport, super contributions) – and all forms of income (salary, bonuses, rental income, dividends, interest and allowances).

A budget gives you a clear idea of your financial position and much more control over your money, so you can manage spending, save regularly and work towards your financial goals. It will also be clear if you need to make more money or are spending too much on any particular thing.

Clear up your debts

Ideally, you should get your finances in order well in advance; lenders love a good savings record and a stable credit history.

What you can do:

Get up to date with your tax and pay any fines or outstanding loans. If you are concerned, you can check your credit score with Equifax or ask your Smartline Adviser to run a report on your credit rating. You should also ditch any credit cards you don’t really need as they may affect your borrowing capacity.

Reassess your expenses and income

The new year is a great time to take stock of your expenses and income to ensure you are being as financially efficient as possible.

What you can do:

Look at your insurances (health, home and contents, car, travel), telecommunications and utility providers, and research other options to see if you can get a better deal. Check in with your Smartline Adviser about a better loan solution. If you are paying for memberships or subscriptions that you barely use, it might be time to cut the cord.

Can you increase your income? Make sure you are being paid fairly. If not, it may be time to ask for a pay rise or consider a new job.

Avoid overspending at Christmas

Don’t get too caught up in the silly season and completely blow your budget; try to keep a clear head when it comes to spending on entertainment and presents.

What you can do:

  • Make a list of presents you want to give people. Make sure the total amount is sensible and within your means.
  • Consider homemade gifts such as artwork, cards, jams, cakes, cookies or photo/video collages. They often mean more to the receiver and can cost next to nothing.
  • Check your memberships (e.g., roadside assistance, banks, airlines) in case you can use reward points.
  • Purchase at the Boxing Day sales if you can.
  • Arrange to do Kris Kringle/Secret Santa within the family (everyone gives one gift to one other person). Remember, Christmas is about spending time together and spreading the love.
  • New Year’s Eve: do you really need to spend $500 on a night out? Think about what brings you pleasure – perhaps a casual night in with a few good friends would be just as fun, if not more so.  

Get professional help

Don’t be afraid to enlist the help of a great mortgage adviser, financial planner and accountant. They are experts and can help you get on track and stay there.

Your Smartline Adviser can work with you to determine how any new debts, assets, expenses or income could affect your borrowing capacity so you won’t have any surprises when you try to take out your next loan.

DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.