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What’s A Simple Way To Increase My Borrowing Capacity?

We find that lot of of our clients don't realise how their current way of living and spending can actively affect their borrowing capacity when it comes to trying to obtain finance.

Here are a few simple ways to start increasing that capacity:

Reduce your credit card limit.

Most people know that reducing their debts can increase their borrowing limit. But did you know that lowering your credit card limit can increase your borrowing capacity?

A lot of lenders take into account 3 - 3.5% of an applicants credit card total limits into their servicing calculations. So on a credit card with a $15,000 limit, lenders can include an additional $450 per month in ongoing expenses in an applicants servicing calculations.

In the eyes of a lender, the higher your credit card limit, the more chance you have to get into financial difficulty. So, if you want a simple way to increase your borrowing limit, get rid of any surplus cards, and reduce your credit card limit to the absolute minimum you need.

Monthly living expenses

Another way to increase your borrowing capacity is to take stock of your monthly living expenses some 3 - 6 months prior to applying for finance. This can be done by budgeting on discretionary expenses and sticking to that budget over a continuous period of time.

By doing this, it demonstrates to potential lenders that you have the ability manage your finances with regards to loan repayments.

Because in reality, the simple truth is that the lenders just want to feel comfortable that you can manage your expenses and that they're going to get their money back.

Refinance of personal loans

If you have a personal loan, then it can sometimes be worth looking at adding this to your home loan amount and paying out the personal loan. Depending on the financier, some personal loans could be around 7% or higher. When your home loan could currently be at an interest rate of 2 - 3%, it can not only help with your loan servicing but it can also save you lots of money in interest too.

We have a multitude of budgeting spreadsheets and step by step guides on how to manage your monthly expenses that can assist you in increasing your potential borrowing capacity. We are always happy to share!

For more tips and ways to possibly increase your borrowing capacity, talk to us at Sky Blue Finance anytime, and we will help get you onto the right budgeting track.