How lenders look at an application

Key points

• Most lenders look at the same broad areas: ability to repay, history, security, purpose and documents.
• Each lender has its own rules and weighs these areas differently.
• Being honest and complete from the start helps everyone.
• Nobody can promise an approval before a lender has assessed the application.

Why it helps to know this

Applying for finance can feel like a black box. You send in forms and wait. Knowing what lenders usually look at helps you prepare, explain your situation clearly and spot gaps before they become problems.

This is a general picture. It is not a list of rules, and it does not tell you whether you will be approved.

1. Ability to repay

This is usually the most important question: can you afford the repayments, now and if things change?

For a person, a lender may look at income, living costs and other debts. For a business, it may look at revenue, profit, cash flow and existing loans. Many lenders also test whether repayments would still be manageable if interest rates went up.

You can do a similar check yourself with the repayment stress test and the debt-to-income snapshot.

2. History

Lenders often look at how you have handled money in the past. This can include your credit report, how long you have been in your job or business, and how you have managed other loans and bills.

A short history or a past problem does not always rule you out. But it helps to be upfront and explain what happened and what has changed.

3. Security

Some loans are secured. That means an asset, such as property, a vehicle or a machine, backs the loan. If the loan is not repaid, the lender may be able to take and sell the asset.

Other loans are unsecured. These rely more on your ability to repay and your history. Some lenders also ask for a guarantor or a personal guarantee from business owners.

What lenders may ask about an asset

• what it is and what it is worth
• who owns it, and whether anything is already owed on it
• whether it is insured

4. Purpose

Lenders want to know what the money is for. The purpose helps them decide which product fits and how risky the loan may be. Buying equipment that earns income is a different story from covering an ongoing loss.

A clear, simple explanation of the purpose, and how it will help you repay, goes a long way.

5. Documents

Documents back up everything above. They show who you are, what you earn, what you own and what you owe. Missing or unclear documents are a common reason for delays and extra questions.

Use the document checklist to see what is often asked for, and read Getting your documents ready for practical tips.

Other things that can matter

Depending on the loan, a lender may also consider your industry, where you are located, the size of the loan, the term and the current economy. Lenders also have to follow the laws in their own country, which can affect what they ask for.

What you can do

• Check your own numbers first, with a buffer for surprises.
• Gather documents early and keep copies.
• Write a short note on the purpose and how you will repay.
• Be honest about any past issues and explain them.
• Ask the lender or broker what else they need, rather than guessing.

Our before you borrow page has more questions to think about.