One step towards getting the best loan product that fits your needs is by having professional and objective credit assessment done. After providing you with a credit guide ensuring your data is kept confidential and you can see who we use and what we are likely to be paid. This will help you – as a borrower—to know whether you are qualified for that loan product of your choice.
At Intellichoice, we provide fully bespoke credit assessment services that aim to gauge the creditworthiness of each potential borrower. As part of our company policy to comply with industry standards of Best Interest Duty (BID), we are required to meet the very exacting requirements of Australian Government legislation around credit contracts.
With that, we still have to deal with credit assessors within most lending institutions even for online lenders who utilise auto decisioning or other AI-enabled credit assessment. We have found that it is still relevant to stay true to old school credit assessment such as the “5 C’s of credit analysis used over the past 100 years.
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The five Cs are the same metrics used by lenders and creditors worldwide to measure the likelihood of the borrower to default on his mortgage. To objectively assess a borrower’s eligibility for any loan products, these five Cs are meticulously scrutinised.
The first thing that lenders usually look into from a potential borrower who is applying for any loan product is their credit history. Whether one is applying for a personal loan or a business loan, their personal credit history is under scrutiny.
It is highly recommended to have an updated copy of your credit report on yourself or the business under your name before applying for any credit. It is also wise to check for possible errors in that report that could potentially hurt your loan application and correct those errors as early as possible.
While credit history provides insights on a borrower’s past credit behavior, references help establish the borrower’s character. Different lending companies use different strategies in doing character checks. One of the most common is to ask people around that the borrower has listed as references in his loan application.
However, some credit companies go beyond the traditional character check. One unconventional method to establish character is to have a tailored-fit character reference check based on the context of each borrower. Some may even do company visits and ask how transparent the borrower applying for a business loan is in declaring their financial statements, for example.
Approving loan applications to individuals who have no capacity to pay the amortisation is a huge mistake that no credit companies are willing to make. Establishing a potential borrower’s capacity to pay can be assessed through different means. One of which is by ensuring that the applicant has a consistent source of income.
Consistent cash flow is not enough in establishing good capacity to pay, but the ratio of the take-home pay and the monthly repayments the individual is making is another information that needs to be considered. Although there is no standard and fixed ratio currently used by credit companies, a good number of sources note that the repayments should not exceed 30 percent of the borrower’s net take-home pay although dependent on individuals alternate income or net worth. If it is more than that, it could lead to the borrower to default on a loan—and that’s not a good thing for lending companies.
Another important information that creditors check before approving any loan application is the capital or the amount that the borrower is willing to shell out on a specific loan. This is very common in home loan applications where borrowers are required to pay a certain amount as a downpayment. While the percentage of the initial capital from the total loan amount varies, the higher the amount the borrower is willing to pay, the higher the likelihood of that loan application being approved.
Creditors consider the high contributions the borrowers are willing to shoulder as a sign of high level of seriousness for that loan. On top of that, this is also a good indicator that the borrower is less likely to default on his loan.
Generally, a collateral is any property that will provide security to the loan. In other words, it provides a safety net that the borrower would not default on his loan. Otherwise, that collateral—oftentimes real estate properties—will be encumbered by the credit company.
Different loan products may require different collaterals and the value of the acceptable collateral is usually determined by the loaned amount.
It is also important that the same collateral has not been used as a guarantee to other existing loans or no prior claims have been filed against the same collateral. Vehicles and some personal lending also falls under this category.
At Intellichoice, our financial experts will guide you which type of collateral to have for your loan product of choice.
During your entire loan application, experts at Intellichoice Finance will be working with you side-by-side to ensure that your loan application is approved. We will help you increase your chance of loan approval in an ethical and professional way.
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