​The first time you apply for a loan, you could feel a bit like a deer in the headlights. With so many questions to answer, you might start to wonder if your mortgage broker is hatching a secret plot to kidnap you and steal your identity. Understanding what lenders are looking for can help to make the process easier for you, and improve your chances of being approved for a loan.

There are five ‘C’s when it comes to lending…

Credit History

Your credit record can have a big impact on whether you’re approved for a loan. Your lender will want to know about money that you have borrowed in the past, and how quickly you paid it back. Credit cards, phone bills, car loans and many other sources of credit are examined when determining your credit rating.

Capital

Your lender will want to know that you have assets and funds accumulated. Particularly, they will want to know how much you will be contributing to the purchase.

Collateral

You will need to offer property as security against your loan. Usually this just means that you offer the house as security, so that if you don’t repay the loan, your lender can sell the property to get their money back.

Capacity

Your lender will assess your ability or capacity to meet repayments. This is done by examining your income and financial commitments such as living expenses, other loan repayments and dependants to determine if you are capable of servicing the loan.

Character

The lender will also take into consideration other details about you, such as your working history and length of employment, how long you have lived in your current residence, and any other available information that might help to determine your suitability for a loan.