New Loan Requirements for December

From December 2021, all lenders will be required to complete a thorough analysis of all your spending when applying for a loan.  This is due to changes in the Credit Contracts and Consumer Finance Act and it’s a bit of a game changer.

Banks have always asked clients to state their expenses at a high level such as ‘how much do you spend on groceries per week?’  They’re now getting much more granular, with questions regarding your spending on alcohol, pay TV, restaurants, pubs, clubs, takeaways, sports, hobbies, gym memberships, tithings/donations, paylater loans, and any other regular outgoings.   Borrowers must also take into account anticipated expenses over the 12 months following their borrowing (such as rates & insurance expenses for first home buyers).

Lenders also have additional responsibilities to assist customers to make an informed decision about their lending.  This includes ensuring product choices align with the needs of the customer, removing misleading advertising, and ensuring clients understand what they’re signing up for.

All of this might seem quite onerous however the changes are being made to protect borrowers and ensure they can afford and understand the terms of the borrowing they’re asking for.

What do these changes mean for you?

If you are planning on applying for any type of loan, you can help speed up the process and success of your application by:

Having a good handle on your income and expenses.  Many banks have expense categorization features on their websites and apps that can help with this

Good record keeping – documents for existing loans, evidence of assets owned and verification of your salary(ies) or up to date financial accounts should be filed in an easily accessible place

If you anticipate applying for a loan, it would be a good idea to cut any unnecessary expenses so that you present yourself in the best light. It’s a great idea to put the savings you make into a savings account to show you’re able to service a new loan.  Banks require 3 months bank statements when applying for a loan so the sooner you start, the better.

Having this type of information in good order will ensure the lender is able to assess your suitability for the loan much quicker. Lenders will no longer be able to rely solely on low level information provided by the borrower to show that they can afford to service this loan.

So, if you are saving for a mortgage or needing a loan or even wanting ‘pay later’ credit, it will certainly speed the process up and ensure a good result if you have a thorough understanding of your finances before you apply.